Silver Bay Realty Trust Corp. - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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EX-99.2 - EXHIBIT 99.2 - Silver Bay Realty Trust Corp.	sbyq32015earningspresent.htm
8-K - 8-K - Silver Bay Realty Trust Corp.	a8kq32015earnings.htm

SILVER BAY REALTY TRUST CORP.

REPORTS THIRD QUARTER 2015 FINANCIAL RESULTS

Recorded 113% Year-Over-Year Increase in Core Funds from Operations to $0.17 per Share

NEW YORK, November 4, 2015 - 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:



PORTFOLIO AND OPERATING SUMMARY
	As of September 30, 2015			As of June 30, 2015
Estimated net asset value per share	$	21.87		$	21.34
Book value per share	$	14.80		$	14.97

	As of September 30, 2015			As of June 30, 2015
Occupancy Rate
Stabilized properties	95		%	95		%
Aggregate portfolio	95		%	95		%
Average monthly rent on the aggregate portfolio	$	1,159		$	1,149

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.

Contact

Anh Huynh, Director of Investor Relations, Silver Bay Realty Trust Corp., ahuynh@silverbaymgmt.com, (952) 358-4400.

SUPPLEMENTAL FINANCIAL AND OPERATING DATA

THIRD QUARTER 2015

TABLE OF CONTENTS



ITEM		Page
CONDENSED CONSOLIDATED BALANCE SHEETS		6
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS		7
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY		8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS		9
PORTFOLIO SUMMARY OF SINGLE-FAMILY PROPERTIES		10
PORTFOLIO SUMMARY OF LEASING STATUS OF PROPERTIES		11
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES		12

SILVER BAY REALTY TRUST CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)



	September 30, 2015 (unaudited)			December 31, 2014
Assets
Investments in real estate:
Land	$	221,158		$	167,780
Building and improvements	990,405			780,590
	1,211,563			948,370
Accumulated depreciation	(65,534		)	(43,150		)
Investments in real estate, net	1,146,029			905,220
Assets held for sale	11,224			2,010
Cash and cash equivalents	41,026			49,854
Escrow deposits	23,028			20,211
Resident security deposits	12,331			8,595
In-place lease and deferred lease costs, net	730			688
Deferred financing costs, net	14,229			11,960
Other assets	6,105			3,842
Total assets	$	1,254,702		$	1,002,380
Liabilities and Equity
Liabilities:
Securitization loan, net of unamortized discount of $1,161 and $1,387, respectively	$	304,025		$	310,665
Revolving credit facility	344,254			67,096
Accounts payable and accrued property expenses	24,400			13,090
Resident prepaid rent and security deposits	13,957			9,634
Total liabilities	686,636			400,485
10% cumulative redeemable preferred stock at liquidation value, $0.01 par; 50,000,000 authorized, 1,000 issued and outstanding	1,000			1,000
Equity:
Stockholders’ equity:
Common stock $0.01 par; 450,000,000 shares authorized; 36,071,059 and 36,711,694, respectively, shares issued and outstanding	358			366
Additional paid-in capital	651,148			660,776
Accumulated other comprehensive loss	(1,589		)	(86		)
Cumulative deficit	(115,888		)	(94,593		)
Total stockholders’ equity	534,029			566,463
Noncontrolling interests - Operating Partnership	33,037			34,432
Total equity	567,066			600,895
Total liabilities and equity	$	1,254,702		$	1,002,380

SILVER BAY REALTY TRUST CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)

(UNAUDITED)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Revenue:
Rental income	$	29,919		$	19,361		$	81,184		$	55,821
Other income	698			613			1,869			1,436
Total revenue	30,617			19,974			83,053			57,257
Expenses:
Property operating and maintenance	6,529			4,787			16,479			12,537
Real estate taxes	3,918			2,732			11,864			8,011
Homeowners’ association fees	512			334			1,465			993
Property management	3,167			2,336			8,262			7,569
Depreciation and amortization	9,068			6,427			25,074			18,800
Advisory management fee - affiliates	—			2,251			—			6,621
Management internalization	—			39,179			—			39,179
Portfolio acquisition expense	66			—			2,046			—
General and administrative	3,973			2,157			12,071			7,323
Share-based compensation	718			259			1,895			716
Interest expense	5,959			3,741			15,307			8,710
Total expenses	33,910			64,203			94,463			110,459
Loss before other income (expense) and non-controlling interests	(3,293		)	(44,229		)	(11,410		)	(53,202		)
Other income (expense):
Net gain on disposition of real estate	2,089			84			2,320			161
Ineffectiveness of interest rate cap agreements	—			(480		)	—			(480		)
Other expense	(223		)	(245		)	(64		)	(684		)
Total other income (expense)	1,866			(641		)	2,256			(1,003		)
Net loss	(1,427		)	(44,870		)	(9,154		)	(54,205		)
Net loss attributable to noncontrolling interests - Operating Partnership	84			—			531			—
Net loss attributable to controlling interests	(1,343		)	(44,870		)	(8,623		)	(54,205		)
Preferred stock distributions	(25		)	(25		)	(75		)	(75		)
Net loss attributable to common stockholders	$	(1,368	)	$	(44,895	)	$	(8,698	)	$	(54,280	)
Loss per share - basic and diluted:
Net loss attributable to common shares	$	(0.04	)	$	(1.17	)	$	(0.24	)	$	(1.41	)
Weighted average common shares outstanding	36,071,146			38,315,231			36,257,449			38,440,421

Comprehensive Loss:
Net loss	$	(1,427	)	$	(44,870	)	$	(9,154	)	$	(54,205	)
Other comprehensive loss:
Change in fair value of interest rate cap agreements	(1,014		)	15			(1,503		)	(208		)
Losses reclassified into earnings from other comprehensive (loss) income	—			481			—			481
Other comprehensive (loss) income	(1,014		)	496			(1,503		)	273
Comprehensive loss	(2,441		)	(44,374		)	(10,657		)	(53,932		)
Less comprehensive loss attributable to noncontrolling interests - Operating Partnership	84			—			531			—
Comprehensive loss attributable to controlling interests	$	(2,357	)	$	(44,374	)	$	(10,126	)	$	(53,932	)

SILVER BAY REALTY TRUST CORP.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)

(UNAUDITED)



	Common Stock								Accumulated Other Comprehensive Loss						Total Stockholders’ Equity			Noncontrolling Interests - Operating Partnership
	Shares		Par Value Amount			Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Cumulative Deficit			Total Stockholders’ Equity			Noncontrolling Interests - Operating Partnership			Total Equity
Balance at January 1, 2015	36,711,694		$	366		$	660,776		$	(86	)	$	(94,593	)	$	566,463		$	34,432		$	600,895
Non-cash equity awards, net	134,031		—			1,826			—			—			1,826			—			1,826
Repurchase and retirement of common stock	(774,666	)	(8		)	(12,318		)	—			—			(12,326		)	—			(12,326		)
Dividends declared	—		—			—			—			(12,672		)	(12,672		)	—			(12,672		)
Net loss	—		—			—			—			(8,623		)	(8,623		)	(531		)	(9,154		)
Other comprehensive loss	—		—			—			(1,503		)	—			(1,503		)	—			(1,503		)
Adjustment to noncontrolling interests - Operating Partnership	—		—			864			—			—			864			(864		)	—
Balance at September 30, 2015	36,071,059		$	358		$	651,148		$	(1,589	)	$	(115,888	)	$	534,029		$	33,037		$	567,066

SILVER BAY REALTY TRUST CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS IN THOUSANDS)

(UNAUDITED)



	Nine Months Ended September 30,
	2015			2014
Cash Flows From Operating Activities:
Net loss	$	(9,154	)	$	(54,205	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	25,074			18,800
Non-cash management internalization	—			36,173
Non-cash share-based compensation	1,826			716
Losses reclassified into earnings from other comprehensive loss	—			481
Amortization and write-off of deferred financing costs	3,341			2,673
Amortization of discount on securitization loan	225			41
Net gain on disposition of real estate	(2,320		)	(161		)
Other	1,129			1,226
Net change in assets and liabilities:
(Increase) decrease in escrow cash for operating activities and debt reserves	(3,776		)	5,962
Increase in deferred lease fees and other assets	(3,733		)	(1,453		)
Increase in accounts payable, accrued property expenses, and prepaid rent	10,459			6,435
Decrease in related party payables, net	—			(7,611		)
Net cash provided by operating activities	23,071			9,077
Cash Flows From Investing Activities:
Purchase of investments in real estate	(272,679		)	(79,590		)
Capital improvements of investments in real estate	(20,698		)	(24,217		)
Increase (decrease) in escrow cash for investing activities	959			(1,587		)
Proceeds from disposition of real estate	21,063			5,406
Cash acquired in management internalization	—			2,067
Other	(43		)	(218		)
Net cash used by investing activities	(271,398		)	(98,139		)
Cash Flows From Financing Activities:
Proceeds from securitization loan	—			311,164
Payments on securitization loan	(6,866		)	(615		)
Proceeds from revolving credit facility	281,963			70,683
Paydown of revolving credit facility	(4,805		)	(235,508		)
Deferred financing costs paid	(5,783		)	(12,201		)
Purchase of interest rate cap agreements	(2,250		)	(393		)
Repurchase and retirement of common stock	(12,326		)	(14,711		)
Dividends paid	(10,434		)	(2,760		)
Net cash provided by financing activities	239,499			115,659
Net change in cash and cash equivalents	(8,828		)	26,597
Cash and cash equivalents at beginning of period	49,854			43,717
Cash and cash equivalents at end of period	$	41,026		$	70,314

Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized	$	11,397		$	5,978
Decrease in fair value of interest rate cap agreements	$	1,503		$	208
Noncash investing and financing activities:
Common stock and unit dividends declared, but not paid	$	4,572		$	1,514
Capital improvements in accounts payable	$	1,058		$	2,352
Non-cash management internalization transaction:
Issuance of units to noncontrolling units	$	—		$	36,173
Other liabilities acquired in management internalization	$	—		$	(2,067	)

SILVER BAY REALTY TRUST CORP.

PORTFOLIO SUMMARY OF SINGLE-FAMILY PROPERTIES

AS OF SEPTEMBER 30, 2015



Market	Number of Properties⁽¹⁾	Aggregate Cost Basis (thousands)⁽²⁾		Average Cost Basis per Property (thousands)		Average Age (in years)⁽³⁾	Average Square Footage
Atlanta	2,730	$	314,982	$	115	21.1	1,798
Phoenix	1,424	202,371		142		26.2	1,636
Tampa	1,112	158,577		143		26.6	1,623
Charlotte	690	84,645		123		14.9	1,643
Orlando	513	67,725		132		27.7	1,492
Dallas	504	67,515		134		23.0	1,618
Jacksonville	452	59,597		132		26.4	1,537
Southeast FL⁽⁴⁾	385	76,352		198		43.5	1,494
Northern CA⁽⁵⁾	384	72,856		190		46.4	1,401
Las Vegas	290	41,244		142		18.7	1,717
Columbus	284	33,087		117		37.6	1,414
Tucson	209	17,416		83		42.0	1,330
Southern CA⁽⁶⁾	97	15,196		157		46.9	1,325
TOTALS	9,074	$	1,211,563	$	134	26.0	1,639


(1)	Total properties exclude properties held for sale or sold and any properties previously acquired in purchases that have been subsequently rescinded or vacated.

(2)

Aggregate cost includes all capitalized costs, determined in accordance with GAAP, incurred through September 30, 2015 for the acquisition, stabilization, and significant post-stabilization renovation of properties, including land, building, possession costs and renovation costs. Aggregate cost includes $12.2 million in capital improvements, incurred from the Company's formation through September 30, 2015, made to properties that had been previously renovated, but does not include accumulated depreciation.


(3)	As of September 30, 2015, approximately 9% of the properties in the aggregate portfolio were less than 10 years old, 35% were between 10 and 20 years old, 20% were between 20 and 30 years old, 17% were between 30 and 40 years old, 9% were between 40 and 50 years old and 10% were more than 50 years old. Average age is an annual calculation.


(4)	Southeast Florida market currently consists of Miami-Dade, Broward and Palm Beach counties.


(5)	Northern California market currently consists of Contra Costa, Napa and Solano counties.


(6)	Southern California market currently consists of Riverside and San Bernardino counties.

SILVER BAY REALTY TRUST CORP.

PORTFOLIO SUMMARY OF LEASING STATUS OF PROPERTIES

AS OF SEPTEMBER 30, 2015



Market	Number of Properties	Number of Stabilized Properties⁽¹⁾	Properties Leased	Properties Vacant	Aggregate Portfolio Occupancy Rate		Stabilized Occupancy Rate		Average Monthly Rent⁽²⁾
Atlanta	2,730	2,729	2,551	179	93.4	%	93.5	%	$	1,053
Phoenix	1,424	1,424	1,378	46	96.8	%	96.8	%	1,095
Tampa	1,112	1,112	1,036	76	93.2	%	93.2	%	1,289
Charlotte	690	689	633	57	91.7	%	91.9	%	1,053
Orlando	513	513	503	10	98.1	%	98.1	%	1,139
Dallas	504	504	479	25	95.0	%	95.0	%	1,287
Jacksonville	452	452	446	6	98.7	%	98.7	%	1,130
Southeast FL	385	381	357	28	92.7	%	93.7	%	1,648
Northern CA	384	384	380	4	99.0	%	99.0	%	1,573
Las Vegas	290	290	284	6	97.9	%	97.9	%	1,181
Columbus	284	284	273	11	96.1	%	96.1	%	1,066
Tucson	209	209	201	8	96.2	%	96.2	%	842
Southern CA	97	97	89	8	91.8	%	91.8	%	1,226
Totals	9,074	9,068	8,610	464	94.9	%	94.9	%	$	1,159

(1)

The Company considers a property stabilized at the earlier of (a) its first authorized occupancy or (b) 90 days after the renovations for such property are complete regardless of whether the property is leased. Properties acquired with an in-place lease are considered stabilized even though such properties may require future renovation to meet the Company's standards and may have existing residents who would not otherwise meet the Company's resident screening requirements.


(2)	Average monthly rent for leased properties was calculated as the average of the contracted monthly rent for all leased properties as of September 30, 2015 and reflects rent concessions amortized over the life of the related lease.

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:



(amounts in thousands except share data)	September 30, 2015						September 30, 2014
	Amount			Per Share⁽¹⁾			Amount			Per Share⁽²⁾
Investments in real estate, gross	$	1,211,563		$	31.63		$	878,793		$	21.99
Accumulated depreciation	(65,534		)	(1.71		)	(36,653		)	(0.92		)
Investments in real estate, net	1,146,029			29.92			842,140			21.07
Add: Increase in estimated fair market value of investments in real estate⁽³⁾	284,198			7.42			181,506			4.54
Less: Estimated Renovation Reserve⁽⁴⁾	(13,753		)	(0.35		)	(5,845		)	(0.14		)
Estimated Portfolio Value	$	1,416,474		$	36.99		$	1,017,801		$	25.47

Book value⁽⁵⁾	$	567,066		$	14.80		$	622,317		$	15.57
Less: Investments in real estate, net	(1,146,029		)	(29.92		)	(842,140		)	(21.07		)
Add: Estimated Portfolio Value	1,416,474			36.99			1,017,801			25.47
Estimated Net Asset Value	$	837,511		$	21.87		$	797,978		$	19.97


(1)	Per share amounts are based upon common shares outstanding of 36,071,059 plus 2,231,511 common units for a total of 38,302,570 fully diluted shares outstanding as of September 30, 2015.


(2)	Per share amounts are based upon common shares outstanding of 37,729,082 plus 2,231,511 common units for a total of 39,960,593 fully diluted shares outstanding as of September 30, 2014.


(3)	Difference between AVM derived value of the Company's portfolio of properties of $1.4 billion and $1.0 billion as of September 30, 2015 and 2014, respectively, which assumes all properties are fully renovated, and net investments in real estate.


(4)	Estimated renovation reserve is calculated on properties in the portfolio that are not currently stabilized and for which the initial renovation has not been completed and for homes acquired with an in-place lease.


(5)	Book value as defined by GAAP represents total assets less total liabilities and less preferred stock in mezzanine or total equity.

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):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net loss	$	(1,427	)	$	(44,870	)	$	(9,154	)	$	(54,205	)
Depreciation and amortization	9,068			6,427			25,074			18,800
Advisory management fee - affiliates	—			2,251			—			6,621
Management internalization	—			39,179			—			39,179
Portfolio acquisition expense	66			—			2,046			—
General and administrative	3,973			2,157			12,071			7,323
Share-based compensation	718			259			1,895			716
Interest expense	5,959			3,741			15,307			8,710
Net gain on disposition of real estate	(2,089		)	(84		)	(2,320		)	(161		)
Ineffectiveness of interest rate cap agreements	—			480			—			480
Other expense	223			245			64			684
Property operating and maintenance add back:
Market ready costs prior to initial lease and other	6			76			169			220
Property management add backs	—			112			—			487
Net operating income	$	16,497		$	9,973		$	45,152		$	28,854
Net operating income as a percentage of total revenue	53.9		%	49.9		%	54.4		%	50.4		%

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):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net loss⁽¹⁾	$	(1,427	)	$	(44,870	)	$	(9,154	)	$	(54,205	)
Depreciation and amortization	9,068			6,427			25,074			18,800
Net gain on disposition of real estate	(2,089		)	(84		)	(2,320		)	(161		)
Other expense (income)	14			197			(239		)	721
Funds from operations	$	5,566		$	(38,330	)	$	13,361		$	(34,845	)

Adjustments:
Portfolio acquisition expense⁽²⁾	$	66		$	—		$	2,046		$	—
Acquisition fees and costs expensed⁽³⁾	—			—			—			835
Securitization fees and costs expensed⁽⁴⁾	—			217			—			801
Share-based compensation	718			259			1,895			716
Market ready costs prior to initial lease and other	6			76			169			220
System implementation costs	—			15			—			139
Management internalization⁽¹⁾	—			39,179			—			39,179
Write-off of deferred financing fees	—			1,058			31			1,058
Ineffectiveness of interest rate cap agreements	—			480			—			480
Amortization of discount on securitization loan	75			41			225			41
Other expense⁽⁵⁾	1			—			114			—
Core funds from operations	$	6,432		$	2,995		$	17,841		$	8,624

FFO	$	5,566		$	(38,330	)	$	13,361		$	(34,845	)
Preferred stock distributions	(25		)	(25		)	(75		)	(75		)
FFO available to common shares and units	$	5,541		$	(38,355	)	$	13,286		$	(34,920	)

Core FFO	$	6,432		$	2,995		$	17,841		$	8,624
Preferred stock distributions	(25		)	(25		)	(75		)	(75		)
Core FFO available to common shares and units	$	6,407		$	2,970		$	17,766		$	8,549

Weighted average common shares and units outstanding⁽⁶⁾	38,302,657			38,339,487			38,488,960			38,448,595
FFO per share	$	0.14		$	(1.00	)	$	0.35		$	(0.91	)
Core FFO per share	$	0.17		$	0.08		$	0.46		$	0.22


(1)	Includes costs to internalize the former advisory manager of $39.2 million, primarily related to issuance of common units of the operating partnership and to a lesser extent, certain transaction costs and assumption of certain liabilities during the three and nine months ended September 30, 2014.


(2)	Includes a one-time expense for costs related to The American Home portfolio acquisition.


(3)	Includes a one-time expense reflected in general and administrative expense to acquire the former Tampa third-party property manager.


(4)	Represents non-capitalizable costs related to the Company's securitization transaction for personnel and other matters.


(5)	Non-comparable costs from prior periods.


(6)	Represents the weighted average of common shares and common units in the operating partnership outstanding for the periods presented.

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