10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

or

oTRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to            

Commission File Number 001-37560

SILVER BAY REALTY TRUST CORP.

(Exact name of registrant as specified in its charter)

Maryland	90-0867250
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)
601 Carlson Parkway, Suite 250
Minnetonka, Minnesota	55305
(Address of principal executive offices)	(Zip Code)

(952) 358-4400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer x	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

As of November 5, 2013, there were 38,807,848 shares of common stock, par value $0.01 per share, outstanding.

SILVER BAY REALTY TRUST CORP.

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2013

INDEX

Part I.	Financial Information
Item 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2013 and 2012	3
	Condensed Consolidated Statements of Changes in Equity for the Nine months ended September 30, 2013 and 2012	4
	Condensed Consolidated Statements of Cash Flows for the Nine months ended September 30, 2013 and 2012	5
	Notes to the Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
Part II.	Other Information
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	29
Signatures		30
Index to Exhibits		31

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.

The forward-looking statements contained in this report reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement. Statements regarding the following subjects, among others, may be forward-looking:

·our business and investment strategy and our ability to execute our business and investment strategy effectively;

·our projected operating results;

·our ability to identify properties to acquire and complete acquisitions and the rate of such acquisitions;

·our ability to gain possession and renovate properties;

·our ability to successfully lease and operate acquired properties;

·the rates of defaults on, early terminations of or non-renewal of leases by residents;

·projected operating costs;

·rental rates or vacancy rates;

·our ability to obtain financing arrangements;

·our ability to meet the conditions to draw under our revolving credit facility;

·our ability to execute share repurchases;

·interest rates and the market value of our target assets;

·our ability to qualify and maintain qualification as a REIT for U.S. federal income tax purposes;

·availability of qualified personnel;

·estimates relating to our ability to make distributions to our stockholders in the future;

·our understanding of our competition;

·home value appreciation and rental appreciation in our markets and the rates and extent of such appreciation;

·general volatility of the markets in which we participate; and

·market trends in our industry and the markets in which we participate, real estate values, the debt securities markets or the general economy.

For a discussion of some of the factors that could cause our actual results to differ materially from any forward-looking statements, see the discussion on risk factors in Item 1A, “Risk Factors,” and in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in this Quarterly Report on Form 10-Q and other risks and uncertainties detailed in this and our other reports and filings with the Securities and Exchange Commission, or SEC.  The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q.  We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable laws.  You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

1

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

Silver Bay Realty Trust Corp.

Condensed Consolidated Balance Sheets

(amounts in thousands except share data)

	September 30, 2013
	(unaudited)			December 31, 2012
Assets
Investments in real estate:
Land	$	135,510		$	82,310
Building and improvements	616,868			338,252
	752,378			420,562
Accumulated depreciation	(13,297		)	(1,869		)
Investments in real estate, net	739,081			418,693
Assets held for sale	7,450			—
Cash and cash equivalents	53,528			228,139
Escrow deposits	22,679			19,727
Resident security deposits	6,105			2,266
In-place lease and deferred lease costs, net	930			2,363
Deferred financing costs, net	3,485			—
Other assets	5,732			6,114
Total Assets	$	838,990		$	677,302
Liabilities and Equity
Liabilities:
Revolving credit facility	$	144,734		$	—
Accounts payable and accrued property expenses	10,169			4,550
Resident prepaid rent and security deposits	7,389			2,713
Amounts due to the manager and affiliates	6,001			3,071
Amounts due previous owners	3,186			6,555
Total Liabilities	171,479			16,889
10% cumulative redeemable preferred stock, $.01 par; 50,000,000 authorized, 1,000 issued and outstanding	1,000			1,000
Equity:
Stockholders’ Equity:
Common stock $.01 par; 450,000,000 shares authorized; 38,812,821 and 37,328,213, respectively shares issued and outstanding	387			372
Additional paid-in capital	692,205			664,146
Accumulated other comprehensive loss	(243		)	—
Cumulative deficit	(26,328		)	(5,609		)
Total Stockholders’ Equity	666,021			658,909
Noncontrolling interests - Operating Partnership	490			504
Total Equity	666,511			659,413
Total Liabilities and Equity	$	838,990		$	677,302

See accompanying notes to the condensed consolidated financial statements.

2

Silver Bay Realty Trust Corp.

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)

 (amounts in thousands except share data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Revenue:
Rental income	$	13,923		$	726		$	31,544		$	811
Other income	563			20			1,340			22
Total revenue	14,486			746			32,884			833
Expenses:
Property operating and maintenance	4,280			638			8,624			774
Real estate taxes	1,761			406			4,893			526
Homeowners’ association fees	286			155			847			162
Property management	3,675			55			9,173			64
Depreciation and amortization	5,683			449			14,061			481
Advisory management fee - affiliates	2,166			610			7,596			804
General and administrative	1,866			103			5,343			296
Interest expense	989			—			1,147			—
Other	142			2			690			2
Total expenses	20,848			2,418			52,374			3,109
Net loss	(6,362		)	(1,672		)	(19,490		)	(2,276		)
Net loss attributable to noncontrolling interests - Operating Partnership	5			—			14			—
Net loss attributable to controlling interests	(6,357		)	—			(19,476		)	—
Preferred stock distributions	(25		)	—			(75		)	—
Net loss attributable to common stockholders	$	(6,382	)	$	—		$	(19,551	)	$	—
Loss per share - basic and diluted (Note 7):
Net loss attributable to common shares	$	(0.16	)	$	—		$	(0.50	)	$	—
Weighted average common shares outstanding	39,095,200			—			39,198,239			—
Comprehensive Loss:
Net loss	$	(6,362	)	$	(1,672	)	$	(19,490	)	$	(2,276	)
Other comprehensive loss:
Change in fair value of interest rate cap derivatives	(243		)	—			(243		)	—
Other comprenhensive loss	$	(243	)	$	—		$	(243	)	$	—
Comprehensive loss	(6,605		)	(1,672		)	(19,733		)	(2,276		)
Less comprehensive loss attributable to noncontrolling interests - Operating Partnership	5			—			14			—
Comprehensive loss attributable to controlling interests	$	(6,600	)	$	(1,672	)	$	(19,719	)	$	(2,276	)

See accompanying notes to the condensed consolidated financial statements.

3

Silver Bay Realty Trust Corp.

Condensed Consolidated Statements of Changes in Equity

(amounts in thousands except share data)

	Common Stock																	Noncontrolling
						Additional									Total			Interests -
			Par Value			Paid-In			Accumulated Other			Cumulative			Stockholders’			Operating					Total
	Shares		Amount			Capital			Comprehensive Loss			Deficit			Equity			Partnership			Parent Equity		Equity
Balance at January 1, 2012	—		$	—		$	—		$	—		$	(89	)	$	—		$	—		$	250	$	161
Capital contributions	—		—			—			—			—			—			—			226,000		226,000
Net loss	—		—			—			—			(2,276		)	—			—			—		(2,276		)
Balance at September 30, 2012	—		$	—		$	—		$	—		$	(2,365	)	$	—		$	—		$	226,250	$	223,885
Balance at January 1, 2013	37,328,213		$	372		$	664,146		$	—		$	(5,609	)	$	658,909		$	504		$	—	$	659,413
Net proceeds from sale of common stock	1,987,500		20			34,368			—			—			34,388			—			—		34,388
Non-cash equity awards	(2,892	)	—			404			—			—			404			—			—		404
Repurchase of common stock	(500,000	)	(5		)	(7,785		)	—			—			(7,790		)	—			—		(7,790		)
Dividends declared	—		—			—			—			(1,243		)	(1,243		)	—			—		(1,243		)
Other	—		—			1,072			—			—			1,072			—			—		1,072
Net loss	—		—			—			—			(19,476		)	(19,476		)	(14		)	—		(19,490		)
Other comprehensive loss	—		—			—			(243		)	—			(243		)	—			—		(243		)
Balance at September 30, 2013	38,812,821		$	387		$	692,205		$	(243	)	$	(26,328	)	$	666,021		$	490		$	—	$	666,511

See accompanying notes to the condensed consolidated financial statements.

4

Silver Bay Realty Trust Corp.

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

	Nine Months Ended September 30,
	2013			2012
Cash Flows From Operating Activities:
Net loss	$	(19,490	)	$	(2,276	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization	14,061			481
Non-cash stock compensation	746			—
Amortization of deferred financing costs	480			—
Other	333			—
Net change in assets and liabilities:
Increase in escrow reserves under the credit facility	(12,645		)	—
Increase in escrow cash for operating activities	(1,282		)	(8,319		)
Increase in deferred lease fees and other assets	(377		)	(601		)
Increase in accounts payable, accrued property expenses, and prepaid rent	3,461			2,631
Increase in related party payables, net	855			1,193
Net cash used by operating activities	(13,858		)	(6,891		)
Cash Flows From Investing Activities:
Purchase of investments in real estate	(258,910		)	(178,775		)
Capital improvements of investments in real estate	(82,877		)	(12,590		)
Decrease (increase) in escrow cash for investing activities	10,975			(556		)
Proceeds from sale of investments in real estate	4,195			—
Other	(252		)	—
Net cash used by investing activities	(326,869		)	(191,921		)
Cash Flows From Financing Activities:
Proceeds from issuance of common stock, net of offering costs	34,513			—
Proceeds from revolving credit facility	144,734			—
Deferred financings costs paid	(3,965		)	—
Interest rate cap agreements	(533		)	—
Repurchase of common stock	(7,790		)	—
Dividends paid	(843		)	—
Capital contribution of parent, net	—			226,000
Net cash provided by financing activities	166,116			226,000
Net change in cash and cash equivalents	(174,611		)	27,188
Cash and cash equivalents at beginning of period	228,139			250
Cash and cash equivalents at end of period	$	53,528		$	27,438
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,336		$	—
Board of directors stock compensation	$	125		$	—
Noncash investing and financing activities:
Common stock and unit dividends declared, but not paid	$	(387	)	$	—
Advisory management fee - additional basis	$	1,071		$	—
Change in contingent consideration	$	222		$	—
Capital improvements in accounts payable	$	2,796		$	—

See accompanying notes to the condensed consolidated financial statements.

5

SILVER BAY REALTY TRUST CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Quarter Ended September 30, 2013

(amounts in thousands, except share data and property counts)

Note 1.  Organization and Operations

Silver Bay Realty Trust Corp., or Silver Bay or the Company, is a Maryland corporation that is the continuation of the operations of Silver Bay Property Investment LLC (formerly Two Harbors Property Investment LLC), or Silver Bay Property or the Company’s Predecessor, through a contribution of equity interests in Silver Bay Property to the Company and an initial public offering on December 19, 2012, or the Offering, and certain Formation Transactions described in Note 3.  Until the Offering, Silver Bay Property was a wholly-owned subsidiary of Two Harbors Investment Corp., or Two Harbors or Parent.  The Company began formal operations in February 2012 when it started acquiring single-family properties financed through a parent capital contribution of $101,000.

The Company is focused on the acquisition, renovation, leasing and management of single-family residential properties in selected markets in the United States.  As of September 30, 2013, the Company owned 5,575 single-family residential properties, excluding assets held for sale.  The Company owns properties in Phoenix, AZ, Tucson, AZ, Northern California (currently consisting of Contra Costa, Napa, and Solano counties), Southern California (currently consisting of Riverside and San Bernardino counties), Orlando, FL, Tampa, FL, Southeast Florida (currently consisting of Miami-Dade, Broward and Palm Beach counties), Jacksonville, FL, Atlanta, GA, Las Vegas, NV, Charlotte, NC, Columbus, OH, Dallas, TX, and Houston, TX.

The Company has elected to be treated as a real estate investment trust, or REIT, for U.S. federal tax purposes, commencing with, and in connection with the filing of its federal tax return for the portion of its taxable year ended December 31, 2012. As a REIT, the Company will generally not be subject to federal income tax on the taxable income that it distributes to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax at regular corporate rates. Even if it qualifies for taxation as a REIT, the Company may be subject to some federal, state and local taxes on its income or property. In addition, the income of any taxable REIT subsidiary, or TRS, that the Company owns will be subject to taxation at regular corporate rates.

The Company is externally managed by PRCM Real Estate Advisers LLC, or the Manager. The Company relies on the Manager to provide or obtain on its behalf the personnel and services necessary for it to conduct its business as the Company has no employees of its own.

Note 2.  Basis of Presentation and New Accounting Pronouncements

Consolidation and Basis of Presentation

The interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles, or GAAP, have been condensed or omitted according to such SEC rules and regulations. Management believes, however, that the disclosures included in these interim condensed consolidated financial statements are adequate to make the information presented not misleading. The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.  In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at September 30, 2013 and results of operations for all periods presented have been made. The results of operations for the three or nine months ended September 30, 2013 should not be construed as indicative of the results to be expected for the full year.

The accompanying condensed consolidated financial statements include the accounts of all subsidiaries and intercompany accounts and transactions have been eliminated.  The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and Silver Bay Operating Partnership L.P., or the Operating Partnership. The Company consolidates real estate partnerships and other entities that are not variable interest entities when it owns, directly or indirectly, a majority voting interest in the entity or is otherwise able to control the entity.

6

SILVER BAY REALTY TRUST CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Quarter Ended September 30, 2013

(amounts in thousands, except share data and property counts)

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that may affect the reported amounts and disclosures in the financial statements.  The Company’s estimates are inherently subjective in nature and actual results could differ from these estimates.

Reclassifications

Certain reclassifications have been made to amounts in prior period financial statements to conform to current period presentation.  A balance of $24,653, representing cash in acquisition accounts, which are now in the control of the Company, has been reclassified from escrow deposits to cash and cash equivalents in the condensed consolidated balance sheet as of September 30, 2012.  This reclassification impacted the prior presentation in the condensed consolidated statement of cash flows for the nine months ended September 30, 2012.

Assets Held for Sale

The Company evaluates its long-lived assets on a regular basis to ensure the individual properties still meet its investment criteria. If the Company has determined that an individual property no longer meets its investment criteria, a decision is made to dispose of the property. The property is subject to the Company’s impairment test and any losses are recognized immediately. The property is then marketed for sale and classified as held for sale in the consolidated financial statements, with any material operations reported as discontinued operations.

The properties included in held for sale at September 30, 2013 did not have material leasing operations under the Company’s ownership.

For the three and nine months ended September 30, 2013, the Company recognized $206 and $518, respectively, in impairment charges and $156 and $185, respectively, in net gain on sale of assets.  Impairment and gain on sale of assets are included within other in the condensed consolidated statements of operations and comprehensive loss.  The Company did not record impairment or dispose of assets during the three and nine months ended September 30, 2012.

Cash and Cash Equivalents

The Company considers all demand deposits, money market accounts and investments in certificates of deposit purchased with a maturity of three months or less at the date of purchase to be cash equivalents.  The Company had no cash equivalents as of September 30, 2013 or December 31, 2012.

Escrow Deposits

Escrow deposits include refundable and non-refundable cash and earnest money on deposit with the Manager’s operating subsidiary and certain third party property managers for property purchases and renovation costs, certain municipalities for property purchases, and earnest money deposits.  Escrow deposits also include cash held in reserve at financial institutions, as required by the revolving credit facility described below.  The Company had $12,645 in cash reserves relating to its revolving credit facility as of September 30, 2013.

Rent and Other Receivables, Net

The Company maintains an allowance for doubtful accounts for estimated losses that may result from the inability of residents to make required rent or other payments.  This allowance is estimated based on payment history and current occupancy status.  The Company generally does not require collateral or other security from its residents, other than security deposits.  If estimates of collectability differ from the cash received, the timing and amount of the Company’s reported revenue could be impacted.

Recent Accounting Pronouncements

Under the Jumpstart Our Business Startups Act, or the JOBS Act, the Company meets the definition of an “emerging growth company.” The Company has irrevocably elected to opt out of the extended transition period for complying with new or revised U.S. accounting standards pursuant to Section 107(b) of the JOBS Act. As a result, the Company will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.

7

SILVER BAY REALTY TRUST CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Quarter Ended September 30, 2013

(amounts in thousands, except share data and property counts)

Note 3.  Formation Transactions and Offering

On December 19, 2012, the Company completed the Offering and raised approximately $228,517 in net proceeds through the issuance of 13,250,000 common shares.  On January 7, 2013, the Company sold an additional 1,987,500 common shares and received net proceeds of approximately $34,388, inclusive of the May 2013 $125 stock award to the Company’s independent directors described in Note 5, which off-set the proceeds.

Concurrently with the Offering, the Company also completed certain merger and formation transactions, or the Formation Transactions. Included in the Formation Transactions was the contribution of the ownership interest of the Predecessor by Two Harbors. For accounting purposes, the Predecessor was considered the acquiring or surviving entity, meaning the Silver Bay Property historical assets and liabilities included in the condensed consolidated balance sheets are recorded at the Predecessor’s historical carryover cost basis. In consideration for the contribution, Two Harbors received 17,824,647 shares of the Company’s common stock, and 1,000 shares of cumulative redeemable preferred stock with an aggregate liquidation preference of $1,000 per share.  On April 24, 2013, Two Harbors distributed by way of a special dividend all shares of the Company’s common stock to their stockholders on a pro rata basis.

The owners of the membership interests of entities managed by Provident Real Estate Advisors LLC, or the Provident Entities, contributed their interests in the Provident Entities, which owned 881 single-family properties, to the Company as part of the Formation Transactions.  The contribution of the Provident Entities was considered an acquisition for accounting purposes, resulting in the assets and liabilities of the Provident Entities being recorded at their fair value of $118,492.  In consideration for their contribution, the owners of the Provident Entities received 6,092,995 shares of the newly formed entity’s common stock, valued at $18.50 per share, $5,263 in cash (a use of net proceeds from the Offering), and 27,459 common units in the Operating Partnership, valued at $18.50 per unit because the common units are redeemable for cash or, at the Company’s election, shares of Company common stock on a one-for-one basis, subject to applicable adjustments.  The allocations of the purchase price for the Provident Entities were made in accordance with the Company’s allocation policies. There was no allocation of fair value for above or below market in-place leases based on the short-term nature of the leases and stated rates approximating current rental rates.

Certain working capital adjustments have been finalized as of September 30, 2013.  Included in the condensed consolidated balance sheets within amounts due previous owners is a $844 payable and $202 receivable from the prior members of the Provident Entities as of September 30, 2013 and December 31, 2012, respectively, and $1,261 due to Two Harbors as of December 31, 2012.  The Company will finalize the Provident Entities working capital position after the first anniversary of the Formation Transactions.  There were no working capital adjustments with Two Harbors as of September 30, 2013.  Any future working capital adjustments related to Silver Bay Property will be reflected as an adjustment to additional paid in capital and working capital adjustments related to the Provident Entities will be reflected as a basis adjustment to the single-family properties acquired.

In addition, the Company is required to make payments of cash to both Two Harbors and the prior members of the Provident Entities as additional purchase price consideration in the Formation Transactions. The total amount to be paid to Two Harbors and prior members of the Provident Entities is equal to 50% of the advisory management fee payable to the Manager, as described in Note 8, during the first year after the Offering (before adjustment for any property management fees received by the Manager’s operating subsidiary), subject to an aggregate amount payable to Two Harbors of no more than $4,024.  These payments reduce the amount owed to the Manager on a dollar-for-dollar basis and thus have no net impact on expenditures of the Company. The amounts to be individually paid to Two Harbors and prior members of the Provident Entities are based upon the relative values they each provided as part of the Formation Transactions, which were approximately 73.6% and 26.4%, respectively. As a result, as of September 30, 2013, the Company has an estimated remaining liability of $2,342 as part of its Formation Transactions.  The additional cash payments are required to be made quarterly in conjunction with the payment of the advisory management fee.

During the three and nine months ended September 30, 2013, the Company recorded advisory management fee expense of $2,166 and $7,596 (see Note 8), of which $872 and $2,991 relates to the amortization of the deferred charges for the Two Harbors component of the fee and $312 and $1,071 relates to the Provident Entities component of the fee, respectively.  Based upon Two Harbors’ assets being recorded at carryover basis, the estimated liability related to Two Harbors of $1,729 has been recorded as a deferred charge and included in other assets on the condensed consolidated balance sheets and will be amortized as advisory management fee expense ratably each quarter.  The estimated liability related to the Provident Entities of $613 has been recorded as additional basis to the single-family residential real properties acquired from the Provident Entities. Because these payments will be funded by the Manager through the reduction of its advisory management fee, the Company has determined that the full recognition of advisory management fee expense would still need to be recorded and will record the portion related to payments to the prior members of the Provident Entities through the recognition of additional paid-in capital, which amounted to $312 and $1,071 for the three and nine months ended September 30, 2013, respectively.

8

SILVER BAY REALTY TRUST CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Quarter Ended September 30, 2013

(amounts in thousands, except share data and property counts)

Note 4.  Revolving Credit Facility

On May 10, 2013, the Company entered into a $200,000 revolving credit facility with a syndicate of banks.  The Company is able to draw up to 55% of the aggregate value of the eligible properties based on the lesser of (a) the third-party broker price opinion value or (b) the original purchase price plus certain renovation and other capitalized costs of the properties.  The revolving credit facility matures on May 10, 2016 and bears interest at a varying rate of the London Interbank Offered Rate, or LIBOR, plus 3.50% subject to a LIBOR floor of 0.5%.  The Company is also required to pay a monthly fee on the unused portion of the revolving credit facility at a rate of 0.5% per annum, which began to accrue 90 days following the closing of the revolving credit facility. The revolving credit facility may be used for the acquisition, financing, and renovation of properties and other general purposes. As of September 30, 2013, $144,734 was outstanding under the revolving credit facility and the weighted average interest rate for the three and nine months ended September 30, 2013 was 4.0%.

All amounts outstanding under the revolving credit facility are collateralized by the equity interests and assets of certain of the Company’s subsidiaries, or pledged subsidiaries. The amounts outstanding under the revolving credit facility and certain obligations contained therein are guaranteed by Silver Bay Realty Trust Corp. and the Operating Partnership only in the case of certain bad acts (including bankruptcy) and up to $20,000 for completion of certain property renovations, as outlined in the credit documents.

The pledged subsidiaries are separate legal entities, but continue to be reported in the Company’s consolidated financial statements.  As long as the revolving credit facility is outstanding, the assets of the pledged subsidiaries are not available to satisfy the other debts and obligations of the pledged subsidiaries or the Company.  However the Company is permitted to receive distributions from the pledged subsidiaries as long as the Company and the pledged subsidiaries are current with all payments and in compliance with all other obligations under the revolving credit facility.

The revolving credit facility does not contractually restrict the Company’s ability to pay dividends but certain covenants contained therein may limit the amount of cash available for distribution.  The revolving credit facility requires the Company to meet certain quarterly financial tests pertaining to net worth, total liquidity, debt yield and debt service coverage ratios, as defined by the agreement.  The Company must maintain, as defined by the agreement, total liquidity of $25,000 and a net worth of at least $125,000, excluding assets of the borrowers, at all times.  As of September 30, 2013, the Company satisfied the total liquidity requirement through maintaining a balance in excess of $25,000 in cash and cash equivalents at the Company and the Operating Partnership.  The revolving credit facility also provides for the restriction of cash whereby the Company must set aside funds for payment of insurance, property taxes and certain property operating and maintenance expenses associated with properties in the pledged subsidiaries portfolios.  As of September 30, 2013, the Company has $12,645 included in escrow deposits associated with the required reserves.  The agreement also contains customary events of default for a facility of this type, including payment defaults, covenant defaults, breaches of representations and warranties, bankruptcy and insolvency, judgments, change of control and cross-default with certain other indebtedness.

In connection with the revolving credit facility, the Manager’s operating subsidiary assigned the property management agreements it maintains with third parties to the Company. This means the Company will incur costs under those agreements in the future that are payable directly to the third parties as opposed to paying such amounts to the Manager’s operating subsidiary as reimbursement. The Manager’s operating subsidiary remains obligated to oversee and manage the performance of these property managers. The Company also entered into separate property management agreements with the Manager’s operating subsidiary covering the properties pledged as part of the revolving credit facility. Pursuant to these agreements, the Company pays a property management fee equal to 10% of collected rents, which reduces its reimbursement obligations by an equal amount thus resulting in no net impact to the amount the Company pays the Manager’s operating subsidiary for property management services.

The Company capitalizes interest for properties undergoing renovation activities.  Capitalized interest associated with the Company’s renovation activities totaled $542 and $837, respectively, for the three and nine months ended September 30, 2013.

Costs incurred in the placement of the Company’s debt are being amortized using the straight line method over the term of the related debt.  As of September 30, 2013, the Company has deferred financing costs of $3,485 in connection with its revolving credit facility, net of amortization.  Amortization expense for the three and nine months ended September 30, 2013 was $322 and $480 respectively and was recorded as interest expense in the accompanying consolidated statements of operations and comprehensive loss.

9

SILVER BAY REALTY TRUST CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Quarter Ended September 30, 2013

(amounts in thousands, except share data and property counts)

Interest Rate Cap Agreements

During the third quarter of 2013, the Company entered into interest rate cap agreements with an aggregate notional amount of $170,000, a LIBOR cap of 3.00%, and termination dates of May 10, 2016 at an aggregate purchase price of $533 to manage interest rate risk associated with its revolving credit facility.  The Company determined that the interest rate caps qualify for hedge accounting and, therefore, designated the derivatives as cash flow hedges with future changes in fair value recognized through other comprehensive loss.  Ineffectiveness is calculated as the amount by which the change in fair value of the derivatives exceeds the change in the fair value of the anticipated cash flows related to the revolving credit facility.

The fair value of the interest rate cap agreements is recorded within other assets and the effective portion of the change in fair value is reflected in accumulated other comprehensive loss in the condensed consolidated balance sheets.  Portions of the purchase prices of the interest rate cap agreements, representing the premiums paid to enter into the contracts, were capitalized as deferred financing costs and are being amortized using the straight line method over the terms of the related agreements.  The gains or losses on the interest rate cap agreements are recorded as interest expense in the condensed consolidated statement of operations and comprehensive loss in conjunction with the interest payments made in connection with the revolving credit facility.

As of September 30, 2013 the aggregate fair value of the Company’s interest rate cap agreements was $239 and was recorded in other assets.  For the three and nine months ended September 30, 2013, the Company did not recognize any gains or losses related to the interest rate cap agreements in earnings.

Note 5.  Equity Incentive Plan

On December 4, 2012 The Company adopted an equity incentive plan which provides incentive compensation to attract and retain qualified directors, officers, advisors, consultants and other personnel of the Company, the Manager and the Manager’s operating subsidiary.

On May 22, 2013, the Company awarded each of its independent directors an equity retainer in the form of an award of restricted stock with a fair market value of $50 through the issuance of 13,880 total shares.  This annual equity retainer for such independent directors will vest as to all of such shares on the earlier of (i) the one year anniversary of the date of grant or (ii) the date immediately preceding the date of the Company’s next annual meeting of stockholders, subject in each case, to the independent director’s continued service to the company through the vesting date.  On this date, the Company also awarded each independent director $25 in immediately vesting shares of the Company’s common stock, amounting to 6,940 total shares, in recognition of the additional work involved as independent directors of a new public company.

For the three and nine months ended September 30, 2013, inclusive of the impact of cash dividends, the Company recognized $62 and $301, respectively, of stock compensation expense in property management and $172 and $450, respectively, of stock compensation expense in general and administrative.  Additionally, the Company offset IPO proceeds of $125 as additional paid-in capital related to the shares issued to its independent directors for their additional work related to the Company’s initial public offering.

Note 6.  Stockholders’ Equity

Common Stock Dividends

The following table presents cash dividends declared by the Company on its common stock since its formation:

Declaration Date	Record Date	Payment Date	Cash Dividend per Share
March 21, 2013	April 1, 2013	April 12, 2013	$	0.01
June 20, 2013	July 1, 2013	July 12, 2013	0.01
September 19, 2013	October 1, 2013	October 11, 2013	0.01

Preferred Stock Dividends

The following table presents cash dividends declared by the Company on its 10% cumulative redeemable preferred stock since its formation:

10

SILVER BAY REALTY TRUST CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Quarter Ended September 30, 2013

(amounts in thousands, except share data and property counts)

Declaration Date	Payment Date	Cash Dividend per Share
March 21, 2013	April 12, 2013	$	31.39
June 26, 2013	June 28, 2013	25.00
September 19, 2013	October 11, 2013	24.72

The March 21, 2013 dividend declaration included amounts relating to the period from the date of the Formation Transactions through April 12, 2013.

Share Repurchase Plan

On July 1, 2013, the Company’s Board of Directors authorized the Company to repurchase up to 2,500,000 shares of its common stock through a share repurchase program. Shares may be repurchased from time to time through privately negotiated transactions or open market transactions, pursuant to a trading plan in accordance with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended, or by any combination of such methods. The manner, price, number and timing of share repurchases will be subject to a variety of factors, including market conditions and applicable U.S. Securities and Exchange Commission rules.  As of September 30, 2013, 500,000 shares had been repurchased by the Company under the program and retired for a total cost of $7,790, at an average purchase price of $15.58.

Note 7.  Earnings (Loss) Per Share

The following table presents a reconciliation of net loss and shares used in calculating basic and diluted earnings (loss) per share, or EPS, for the three and nine months ended September 30, 2013.  The Company has not calculated EPS for the comparable periods in 2012, as the Company did not have common stock outstanding until the Formation Transactions closed on December 19, 2012.

The following is a summary of the elements used in calculating basic and diluted EPS computations:

	Three Months Ended			Nine Months Ended
	September 30, 2013			September 30, 2013
Net loss attributable to controlling interests	$	(6,357	)	$	(19,476	)
Preferred stock distributions	$	(25	)	$	(75	)
Net loss attributable to common stockholders	$	(6,382	)	$	(19,551	)
Basic and diluted weighted average common shares outstanding	39,095,200			39,198,239
Net loss per common share - Basic and Diluted	$	(0.16	)	$	(0.50	)

A total of 27,459 common units were outstanding at September 30, 2013, but have been excluded from the calculation of diluted EPS as their inclusion would not be dilutive.

Note 8.  Related Party Transactions

Advisory Management Agreement

In conjunction with the Formation Transactions, the Company and the Manager entered into a new advisory management agreement, whereby the Manager designs and implements the Company’s business strategy and administers its business activities and day-to-day operations, subject to oversight by the Company’s board of directors.  In exchange for these services, the Manager earns a fee equal to 1.5% per annum, or 0.375% per quarter, of the Company’s daily average fully diluted market capitalization, as defined by the agreement, calculated and payable quarterly in arrears. The fee is reduced for the 5% property management fee (described below) received by the Manager’s operating subsidiary or its affiliates under the property management and acquisition services agreement. The Company will also reimburse the Manager for all expenses incurred on its behalf or otherwise in connection with the operation of its business, other than compensation for the Chief Executive Officer and personnel providing data analytics directly supporting the investment function.  If the Manager provides services to a party other than the Company or one of its subsidiaries, a portion of these expenses will be allocated to and reimbursed by such other party in a fair and equitable manner as determined by the Manager in good faith. To date, the Manager has only provided services to the Company.

11

SILVER BAY REALTY TRUST CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Quarter Ended September 30, 2013

(amounts in thousands, except share data and property counts)

The initial term of the advisory management agreement expires on December 19, 2015 and will be automatically renewed for a one year term at the end of the initial term and each anniversary thereafter unless terminated. Upon termination of the management agreement by the Company for reasons other than cause, or by the Manager for cause that the Company is unwilling or unable to timely cure, the Company will pay the Manager a termination fee equal to 4.5% of the daily average of the Company’s fully diluted market capitalization in the quarter preceding such termination.

During the three and nine months ended September 30, 2013, the Company expensed $982 and $3,534 respectively, in advisory management fees payable to the Manager (net of the reduction for the 5% property management fee described below).  As outlined in Note 3, the Company is required to make certain payments to Two Harbors and the prior members of the Provident Entities based upon 50% of the advisory management fee earned by the Manager during the first year subsequent to the Offering (before adjustment for any property management fees received by the Manager’s operating subsidiary). The Manager has agreed to fund these payments through the forgiveness of an equal portion of the advisory management fee by the Company during the same period. The Company expensed $1,184 and $4,062, respectively, in advisory management fees payable to Two Harbors and the prior members of the Provident Entities during the three and nine months ended September 30, 2013, and applied such payables as a reduction to advisory management fees to Manager. The remaining portion of the advisory management fee for these periods have been accrued and reflected in amounts due to the Manager and affiliates on the condensed consolidated balance sheets.

Prior to the Formation Transactions, Two Harbors allocated certain advisory expenses related to its operations based on 1.5% of member’s equity on an annualized basis.  During the three and nine months ended September 30, 2012, the Company incurred Two Harbors advisory fees totaling $610 and $804, respectively, which are included in advisory management fee — affiliate in the condensed consolidated statements of operations and comprehensive loss.

The Company also reimbursed the Manager for certain general and administrative expenses, primarily related to employee compensation. Direct and allocated costs incurred by the Manager on behalf of the Company, totaled approximately $978 and $2,797, respectively, for the three and nine months ended September 30, 2013. As of September 30, 2013 and December 31, 2012, the Company owed $1,111 and $1,609, respectively, for these costs including reimbursed offering costs (at December 31, 2012) in equity, which is included in amounts due to the Manager and affiliates in the condensed consolidated balance sheets.

Prior to the Formation Transaction, Two Harbors allocated certain direct general and administrative expenses (primarily professional fees and travel costs) paid on behalf of the Company to external vendors. For the three and nine months ended September 30, 2012, the Company was allocated $126 and $285, respectively, in direct expenses.

Property Management and Acquisition Services Agreement

In conjunction with the Formation Transactions, the Company entered into a new property management and acquisition services agreement with the Manager’s operating subsidiary. Under this agreement, the Manager’s operating subsidiary will acquire additional single-family properties on the Company’s behalf and manages the properties owned by the Company in select markets. For these services, the Company reimburses the Manager’s operating subsidiary for all direct expenses incurred in the operation of its business, including the compensation of its employees. The Manager’s operating subsidiary also receives a property management fee equal to 5% of certain costs and expenses incurred by it in the operation of its business that are reimbursed by the Company. This 5% property management fee reduces the advisory management fee paid to the Manager.

The Manager’s operating subsidiary has agreed not to provide these services to anyone other than the Company, its subsidiaries and any future joint venture in which the Company is an investor prior to December 19, 2015, the initial term of the agreement. The agreement will be automatically renewed for a one year term at the end of the initial term and each anniversary thereafter unless terminated.

During the three and nine months ended September 30, 2013, the Company incurred property management expense of $3,675 and $9,173, respectively.  This included direct expense reimbursements of $2,803 and $7,083, respectively, and the 5% property management fee of $202 and $529, respectively.  The remaining amounts in property management fees of approximately $670 and $1,561 for the three and nine months ended September 30, 2013, respectively, were incurred to reimburse our Manager’s operating subsidiary for expenses payable to third-party property managers or as payments due directly to third-party property managers. In addition, for the three and nine months ended September 30, 2013, the Company incurred charges with the Manager’s operating subsidiary of $1,209 and $3,852, respectively, in acquisitions and renovation fees which were capitalized as part of property acquisition and renovation costs, and $70 and $170, respectively, for leasing services, which are reflected as other assets and are being amortized over the life of the leases (typically one year or less).  As of September 30, 2013 and December 31, 2012, the Company

12

SILVER BAY REALTY TRUST CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Quarter Ended September 30, 2013

(amounts in thousands, except share data and property counts)

owed $4,890 and $994 respectively for these services which are included in amounts due to the manager and affiliates on the condensed consolidated balance sheets.

Prior to the Formation Transactions, Two Harbors paid property management and acquisition service fees based on the number of homes acquired, leased and renovated in addition to a fee based on monthly rental income. Pursuant to these agreements, for the three and nine months ended September 30, 2012 the Company incurred $1,583 and $2,583, respectively, in acquisition and renovation fees which were capitalized as part of property acquisition and renovation costs, $90 and $127, respectively, for leasing services, which are deferred and amortized over the life of the leases (typically one year or less) and $35 and $41, respectively, for property management, which are included in property management on the condensed consolidated statements of operations and comprehensive loss.

Note 9.  Fair Value

Fair Value Measurements

Codification Topic Fair Value Measurements and Disclosures (“ASC 820”) established a three level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

Level 1 — Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 — Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Recurring Fair Value

The Company uses interest rate cap agreements to manage its exposure to interest rate risk, which are considered Level 2 instruments.  Interest rate cap derivatives are valued based on market quotes of comparable instruments.

Fair Value of Financial Instruments

In accordance with ASC 820, the Company is required to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized in the condensed consolidated balance sheets, for which fair value can be estimated.  The following describes the Company’s methods for estimating the fair value for financial instruments. Descriptions are not provided for those items that have zero balances as of September 30, 2013.

·Cash and cash equivalents, escrow deposits, resident security deposits, resident rent receivable (included in other assets), accounts payable and accrued property expenses, amounts due to the manager and affiliates, and amounts due previous owners have carrying values which approximate fair value because of the short-term nature of these instruments.  The Company categorizes the fair value measurement of these assets and liabilities as Level 1.

·The Company’s revolving credit facility has a floating interest rate based on an index plus a spread and the credit spread is consistent with those demanded in the market. Accordingly, the interest rate on this borrowing is at market and thus the carrying value of the debt approximates fair value. The Company categorizes the fair value measurement of this liability as Level 2.

·The Company’s preferred stock had a fair value which approximates its liquidation value at September 30, 2013.  The Company categorizes the fair value measurement of this instrument as Level 2.

Nonrecurring Fair Value

For long-lived assets to be disposed of, an impairment loss is recognized when the estimated fair value of the asset, less the estimated cost to sell, is less than the carrying amount of the asset at the time the Company has determined to sell the asset.  Assets held for sale are valued based on comparable sales data, less estimates of third-party broker commissions, which are gathered from the markets. These impairment measurements constitute nonrecurring fair value measures under ASC 820 and the inputs are characterized as Level 2.

13

SILVER BAY REALTY TRUST CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Quarter Ended September 30, 2013

(amounts in thousands, except share data and property counts)

Note 10.  Commitments and Contingencies

Concentrations

As of September 30, 2013, approximately 60% of the Company’s properties were located in Phoenix, AZ, Tampa, FL, and Atlanta, GA, which exposes the Company to greater economic risks than if owned on a more geographically dispersed portfolio.

Purchase Obligations

As of September 30, 2013, for properties acquired through individual broker transactions which involve submitting a purchase offer, the Company had offers accepted to purchase residential properties for an aggregate amount of $3,659.  However, not all of these properties are certain to be acquired because properties may fall out of escrow through the closing process for various reasons.

Note 11.  Subsequent Events

Events subsequent to September 30, 2013 were evaluated through the date these financial statements were issued and no events were identified requiring further disclosure in these condensed consolidated financial statements.

14

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. This report, including the following Management’s Discussion and Analysis of Financial Conditions and Results of Operations, contains forward-looking statements regarding future events or trends that should be read in conjunction with the factors described under “Special Note Regarding Forward-Looking Statements” included in this report. In addition, our actual results could differ materially from those projected in such forward-looking statements as a result of the factors discussed under “Special Note Regarding Forward-Looking Statements” as well as the risk factors described in Item 1A, “Risk Factors,” of this report.

Overview

We are an externally-managed Maryland corporation focused on the acquisition, renovation, leasing, and management of single-family properties in selected markets in the United States. Our principal financial objective is to generate attractive risk-adjusted returns for our stockholders over the long term, primarily through dividends and secondarily through capital appreciation. We generate virtually all of our revenue by leasing our portfolio of single-family properties. As of September 30, 2013 we owned 5,575 single-family properties in Arizona, California, Florida, Georgia, Nevada, North Carolina, Ohio and Texas, excluding properties held for sale.

Silver Bay Realty Trust Corp. was incorporated in Maryland in June 2012. Silver Bay Realty Trust Corp. conducts its business and owns all of its properties through Silver Bay Operating Partnership L.P., or the Operating Partnership. Silver Bay Realty Trust Corp.’s wholly owned subsidiary, or the General Partner, is the sole general partner of the Operating Partnership. Silver Bay Realty Trust Corp. has no material assets or liabilities other than its investment in the Operating Partnership. As of September 30, 2013, Silver Bay Realty Trust Corp. owned, through a combination of direct and indirect interests, 99.9% of the partnership interests in the Operating Partnership.

We have elected to be treated as a real estate investment trust, or REIT, for U.S. federal tax purposes, commencing with, and in connection with the filing of our federal tax return for, the portion of our taxable year ended December 31, 2012. As a REIT, we generally are not subject to federal income tax on the taxable income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax at regular corporate rates. Even if we qualify for taxation as a REIT, we may be subject to some federal, state and local taxes on our income or property.  In addition, the income of any taxable REIT subsidiary, or TRS, that we own will be subject to taxation at regular corporate rates.

We are externally managed by PRCM Real Estate Advisers LLC, or our Manager. We rely on our Manager to provide or obtain on our behalf the personnel and services necessary for us to conduct our business as we have no employees of our own. Our Manager is a joint venture of an affiliate of Pine River Capital Management L.P., or Pine River, and Provident Real Estate Advisors LLC, or Provident. Our Manager and its operating subsidiary together provide us with a suite of investment, acquisition, project management, and property management services, utilizing the combined expertise of Pine River and Provident.

In connection with our initial public offering in December 2012, we completed a series of contribution and merger transactions, or the Formation Transactions, through which we acquired an initial portfolio, or our Initial Portfolio, of more than 3,300 single-family properties from Two Harbors Investment Corp., or Two Harbors, and the owners of the membership interests of entities managed by Provident, or the Provident Entities. Acquisition of Two Harbors Property Investment LLC (now known as Silver Bay Property Investment LLC), or Silver Bay Property or our Predecessor, accounted for more than 2,400 properties in our Initial Portfolio. Silver Bay Property began acquiring this portfolio of single-family properties in the first quarter of 2012. The acquisition of the Provident Entities accounted for 881 properties in our Initial Portfolio.  Provident began acquiring, renovating, managing, and overseeing the leasing of these single-family properties in 2009, acquiring properties in Arizona, Florida, Georgia, and Nevada through the Provident Entities, five private limited liability companies for which Provident served as the managing member.

15

Property Portfolio

Our real estate investments consist of single-family properties in selected markets. A significant portion of the properties we own are still in the process of being possessed, renovated, marketed, and leased for the first time. As of September 30, 2013, we owned 5,575 single-family properties, excluding properties held for sale, in the following markets:

Market	Number of Properties (1)	Aggregate Cost Basis (2) (thousands)		Average Cost Basis Per Property (thousands)		Average Age (in years) (3)	Average Square Footage	Number of Leased Properties	Number of Vacant Properties (4)	Average Monthly Rent for Leased Properties (5)
Phoenix	1,427	$	198,839	$	139	24.2	1,636	1,275	152	$	1,033
Atlanta	969	117,487		121		16.8	2,023	746	223	1,193
Tampa	926	128,300		139		23.6	1,656	853	73	1,208
Northern CA (6)	384	71,665		187		44.4	1,401	356	28	1,488
Las Vegas	290	40,901		141		16.7	1,719	277	13	1,153
Columbus	284	25,204		89		35.6	1,417	98	186	979
Orlando	214	31,536		147		24.8	1,684	164	50	1,254
Tucson	208	16,898		81		39.9	1,330	195	13	828
Dallas	205	25,201		123		20.4	1,643	147	58	1,255
Southern CA (7)	156	23,218		149		43.0	1,346	141	15	1,146
Southeast FL (8)	154	29,668		193		33.7	1,708	69	85	1,787
Charlotte	130	16,783		129		11.8	1,980	103	27	1,170
Jacksonville	125	16,081		129		30.7	1,575	44	81	1,079
Houston	103	10,597		103		29.8	1,698	53	50	1,181
Totals	5,575	$	752,378	$	135	25.6	1,676	4,521	1,054	$	1,161

(1)Total properties exclude properties held for sale or sold by our TRS and any properties acquired in previous periods in sales that have been subsequently rescinded or vacated.

(2)Aggregate cost includes all capitalized costs, determined in accordance with GAAP, incurred through September 30, 2013 for the acquisition, stabilization, and significant post-stabilization renovation of properties, including land, building, possession costs and renovation costs.  Aggregate cost does not include accumulated depreciation.

(3)As of September 30, 2013, approximately 19% of our properties were less than 10 years old, 26 % were between 10 and 20 years old, 18 % were between 20 and 30 years old, 17% were between 30 and 40 years old, 9 % were between 40 and 50 years old, and 11% were more than 50 years old.

(4)Total number of vacant properties includes properties in the process of stabilization as well as those available for lease.

(5)Average monthly rent for leased properties was calculated as the average of the contracted monthly rent for all leased properties as of September 30, 2013 and reflects rent concessions amortized over the life of the related lease.

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

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

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

Recent Highlights of 2013

Overall portfolio occupancy increased to 81.1% at September 30, 2013 from 64.8% at June 30, 2013 and revenue increased 35.2% on a sequential quarter basis to $14.5 million in the third quarter of 2013.  We completed renovations on approximately 1,005 properties and increased our leased properties by 911 properties (net of move-outs) during the third quarter of 2013, reflecting the declining number of properties requiring renovation or initial leasing as a result of our current portfolio of properties approaching full stabilization. As of September 30, 2013 we owned 4,776 stabilized properties in our portfolio with an occupancy rate of 94.7% at an average monthly rent of $1,161.

We had $53.5 million in cash and cash equivalents at September 30, 2013 and had drawn down $144.7 million under our revolving credit facility.

During the third quarter of 2013, we repurchased 500,000 shares of common stock under our share repurchase program at a total cost of $7.8 million.

16

Factors Likely to Affect Silver Bay Results of Operations

Our results of operations and financial condition will be affected by numerous factors, many of which are beyond our control. The key factors we expect to impact our results of operations and financial condition include our pace and costs of acquisitions, the time and costs required to stabilize a newly acquired property and convert the same to rental use, the age of our properties, rental rates, the varying costs of internal and external property management, occupancy levels, rates of resident turnover, home price appreciation, changes in homeownership rates, changes in homeowners’ association fees and real estate taxes, our expense ratios and our capital structure.

Industry and Market Outlook

The housing market environment in our markets remains attractive for single-family property acquisitions and rentals. Housing prices across all of our core markets have appreciated over the past year. In the third quarter of 2013, housing price increases continued in all our markets. As seen in the following table, each of our current markets experienced at least 3% home price appreciation during the three months ended August 31, 2013. Despite these gains, we believe housing in our markets of Arizona, Florida, Georgia, and Dallas, Texas continues to provide attractive acquisition opportunities and remains inexpensive relative to replacement cost and affordability metrics, and we expect to focus new acquisitions in these markets in the near term.

MSA Home Price Appreciation (“HPA”)(1)

Source: Corelogic as of August 2013

Market	HPA(Peak to Trough)(2)		HPA(Peak to Current)		HPA(Prior 12 months)		HPA(Prior 3 months)
Phoenix, AZ	-53	%	-33	%	18	%	5	%
Tucson, AZ	-43	%	-32	%	9	%	4	%
Northern CA(3)	-60	%	-45	%	29	%	10	%
Southern CA(4)	-53	%	-38	%	23	%	8	%
Jacksonville, FL	-40	%	-29	%	11	%	4	%
Orlando, FL	-55	%	-40	%	16	%	7	%
Southeast FL(5)	-53	%	-40	%	14	%	6	%
Tampa, FL	-48	%	-36	%	13	%	6	%
Atlanta, GA	-34	%	-14	%	17	%	6	%
Charlotte, NC	-17	%	-4	%	8	%	3	%
Las Vegas, NV	-60	%	-44	%	27	%	7	%
Columbus, OH	-18	%	-8	%	3	%	5	%
Dallas, TX	-14	%	1	%	10	%	3	%
Houston, TX	-13	%	5	%	11	%	3	%
National	-33	%	-17	%	12	%	4	%

(1)“MSA” means Metropolitan Statistical Areas, which is generally defined as one or more adjacent counties or county equivalents that have at least one urban core area of at least a 50,000-person population, plus adjacent territory that has a high degree of social and economic integration with the core as measured by commuting ties.

(2)Peak refers to highest historical home prices in a particular market prior to the start of the housing recovery. Trough refers to lowest home prices in a particular market since the peak.

(3)MSA used for Northern California is Fairfield-Vallejo, which most closely approximates the geographic area in which we purchase homes in Northern California. This MSA is comprised of Solano County and the most populous cities in the MSA are Vallejo, Fairfield, Vacaville, Suisun and Benicia.

(4)MSA used for Southern California is Riverside-San Bernardino-Ontario. This MSA is comprised of Riverside and San Bernardino Counties and the most populous cities in the MSA are Riverside, San Bernardino, Fontana and Moreno.

(5)MSA used for Southeast FL is Fort Lauderdale-Pompano Beach-Deerfield Beach.

On the demand side, we anticipate continued strong rental demand for single-family homes. While new building activity has begun to increase, we believe substantial under-investment in residential housing over the past six years will create upward pressure on home prices and rents as demand exceeds supply. We expect this will take time and will be uneven across markets but believe pricing will inevitably revert to replacement cost, which would be favorable to our total return profile.

Acquisitions

Our Manager’s ability to identify and acquire single-family properties that meet our investment criteria will be affected by home prices in our markets, the inventory of properties available through our acquisition channels, competition for our target assets, and our capital available for investment. We acquired 59 properties in the three months ended September 30, 2013. This substantial decrease from previous quarters reflects a continuation of the slowdown that began in the second quarter of 2013, which resulted in our temporarily pausing new acquisitions to continue our focus on renovating and leasing our existing inventory. We began purchasing again at the end of the quarter in certain key markets and expect continued acquisitions in the fourth quarter of 2013. However, because we are nearing full deployment of currently available capital, in the absence of additional debt or equity capital, our pace of acquisitions will remain limited.

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Stabilization, Renovation and Leasing

As of September 30, 2013, a portion of the properties in our portfolio were not yet generating rental income.  Before an acquired property becomes an income producing asset, we must possess, renovate, market and lease the property.  We refer to this process as property stabilization. We consider a property stabilized at the earlier of (i) its first authorized occupancy or (ii) 90 days after the renovations for such property are complete regardless of whether the property is leased. Properties acquired with in-place leases are considered stabilized even though such properties may require future renovation to meet our standards and may have existing residents who would not otherwise meet our resident screening requirements.

We stabilized 972 properties in the three months ended September 30, 2013, a decrease from the number of properties stabilized in the prior quarter that resulted primarily from our nearing full stabilization of our existing portfolio. We also completed renovations on approximately 1,005 properties and increased our leased properties by 911 properties (net of move-outs), reflecting a decrease in the growth rate of our aggregate leased properties. This decrease reflects the declining number of properties requiring renovation or initial leasing as a result of our current portfolio of properties approaching full stabilization.

The typical stabilization period for our properties has ranged from three to six months depending on the factors discussed above. Through September 30, 2013, 53.9% of our properties (including those acquired by our Predecessor but excluding the properties acquired from the Provident Entities) had been stabilized within six months of acquisition.  The average time to stabilization for our properties on a portfolio basis was 141 days and the average time to stabilization for properties stabilized in the third quarter of 2013 was 174 days, each increasing from the comparable average stabilization times as of June 30, 2013. This increased stabilization time on a sequential quarter basis and the higher quarterly average as compared to the portfolio average are each a function of our historic acquisition activity outpacing our historic renovation and leasing activity during our ramp-up, which resulted in our stabilizing longer held properties in the third quarter of 2013 as compared to the second quarter. Of the properties stabilized in the third quarter of 2013, the average time from acquisition to completion of renovation was 136 days and the average time from the completion of renovation until the lease effective date was 39 days compared to averages of 102 days and 43 days, respectively, for properties stabilized in the second quarter of 2013. The sequential quarter increase in the average time from acquisition to completion of renovation is attributable to the same factor that caused our average stabilization time to increase in sequential quarters as described above.

The sum of the average time from acquisition to completion of renovation and the average time from completion of renovation to lease (175 days) differs from the average time to stabilization (174 days) because stabilized properties includes properties where renovations have been completed for at least 90 days even though they have not yet been leased and this cohort of properties had a shorter average time from acquisition to completion of renovation.

The following table summarizes our stabilized properties and those owned six months or longer as of September 30, 2013:

	Stabilized Properties							Properties Owned at Least Six Months
Market	Number of Stabilized Properties	Properties Leased	Properties Vacant	Occupancy Rate		Average Monthly Rent for Leased Stabilized Properties (1)		Properties Owned 6 Months or Longer	Properties Leased	Properties Vacant	Occupancy Rate		Average Monthly Rent for Properties Owned at Least Six Months (2)
Phoenix	1,372	1,275	97	92.9	%	$	1,033	1,274	1,171	103	91.9	%	$	1,036
Atlanta	811	746	65	92.0	%	1,193		773	688	85	89.0	%	1,199
Tampa	870	853	17	98.0	%	1,208		891	821	70	92.1	%	1,211
Northern CA	373	356	17	95.4	%	1,488		344	327	17	95.1	%	1,486
Las Vegas	281	277	4	98.6	%	1,153		277	268	9	96.8	%	1,154
Columbus	107	98	9	91.6	%	979		94	37	57	39.4	%	1,080
Orlando	167	164	3	98.2	%	1,254		132	127	5	96.2	%	1,275
Tucson	202	195	7	96.5	%	828		202	191	11	94.6	%	828
Dallas	158	147	11	93.0	%	1,255		98	80	18	81.6	%	1,270
Southern CA	147	141	6	95.9	%	1,146		156	141	15	90.4	%	1,146
Southeast FL	74	69	5	93.2	%	1,787		108	43	65	39.8	%	1,743
Charlotte	110	103	7	93.6	%	1,170		103	89	14	86.4	%	1,185
Jacksonville	47	44	3	93.6	%	1,079		51	22	29	43.1	%	1,011
Houston	57	53	4	93.0	%	1,181		33	22	11	66.7	%	1,191
Totals	4,776	4,521	255	94.7	%	$	1,161	4,536	4,027	509	88.8	%	$	1,162

(1)       Average monthly rent for leased stabilized properties was calculated as the average of the contracted monthly rent for all stabilized leased properties as of September 30, 2013 and reflects rent concessions amortized over the life of the related lease.

(2)       Average monthly rent for properties owned at least six months was calculated as the average of the contracted monthly rent for all properties owned at least six months as of September 30, 2013 and reflects rent concessions amortized over the life of the related lease.

Stabilized occupancy increased slightly to 94.7% as of September 30, 2013 as compared to 94.3% as of June 30, 2013 as a result of leasing activity maintaining pace with initial renovation activity and resident turnover. Occupancy of properties owned six months or longer increased slightly from 87.2% as of June 30, 2013 to 88.8% as of September 30, 2013 as a result of third quarter renovation and leasing activity keeping pace and exceeding historical acquisition activity.

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In the quarter ended September 30, 2013, 271 properties turned over. This turnover number includes move-outs, evictions and lease breaks on our stabilized portfolio but excludes evictions of unauthorized residents at time of acquisition. Quarterly turnover for the three months ended September 30, 2013 was 5.7%. Quarterly turnover represents the number of properties turned over in the period divided by the number of properties in stabilized status during the period (i.e. 4,776 properties for the three months ended September 30, 2013). We believe that our turnover rate is not indicative of future results on a stabilized portfolio and that the turnover rate will be higher in future periods because the large number of recently-leased and stabilized properties in our current portfolio results in a disproportionately small number of properties with expiring leases and thus lower potential turnover attributable to resident move-out. The total number of properties with lease expirations in the three months ended September 30, 2013 was 675, including properties with month-to-month occupancy in the period. Of these properties, 163 properties turned over (implying a 24.1% turnover rate), including 38 evictions or early move outs and 125 end-of-lease move outs.

Results of Operations

We earn revenue primarily from rents collected from residents under lease agreements for our properties. The key drivers of revenue (aside from portfolio growth) are rental and occupancy rates.  Our revenue may be affected by macroeconomic, local and property level factors, including market conditions, seasonality, resident defaults or vacancies, timing of renovation activities and occupancy of properties and timing to re-lease vacant properties. We acquired our Predecessor upon consummation of the Formation Transactions, and our operations represent the continuation of our Predecessor. Comparisons to the 2012 periods presented in our financial statements are not generally meaningful as our Predecessor did not have substantial operations through September 30, 2012.

Operating expenses associated with the operations of our residential properties primarily include property insurance, utilities and landscape maintenance (once market ready until leased), bad debts, repairs and maintenance, real estate taxes and homeowners’ association fees. Our residential properties are managed by our Manager’s operating subsidiary or third-party property management companies. As our properties are placed in service, we record depreciation and amortization expense on a straight-line basis over the estimated useful life of the related assets.

Expenses associated with the overall operation of our business consist primarily of advisory management fees, general and administrative costs, and interest expense.  Because we have no employees, we rely on our Manager to oversee our operations.  Our general and administrative expenses primarily consist of reimbursed compensation and certain public company expenses.

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The following are our results of operations (unaudited) for the three months ended September 30, 2013 and 2012 and June 30, 2013 along with the nine months ended September 30, 2013 and 2012:

																Sequential Quarter Comparison
Income Statement Data (unaudited)	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,			Three Months Ended September 30, 2013 vs June 30, 2013
(amounts in thousands except share data)	2013			2012			2013			2012			2013			$ Change			% Change
Revenue:
Rental income	$	13,923		$	726		$	31,544		$	811		$	10,325		$	3,598		34.85	%
Other income	563			20			1,340			22			392			171			43.62	%
Total revenue	14,486			746			32,884			833			10,717			3,769			35.17	%
Expenses:
Property operating and maintenance	4,280			638			8,624			774			2,541			1,739			68.44	%
Real estate taxes	1,761			406			4,893			526			1,712			49			2.86	%
Homeowners’ association fees	286			155			847			162			280			6			2.14	%
Property management	3,675			55			9,173			64			3,067			608			19.82	%
Depreciation and amortization	5,683			449			14,061			481			4,961			722			14.55	%
Advisory management fee - affiliates	2,166			610			7,596			804			2,578			(412		)	(15.98	)%
General and administrative	1,866			103			5,343			296			1,949			(83		)	(4.26	)%
Interest expense	989			—			1,147			—			158			831			525.95	%
Other	142			2			690			2			217			(75		)	(34.56	)%
Total expenses	20,848			2,418			52,374			3,109			17,463			3,385			19.38	%
Net loss	(6,362		)	(1,672		)	(19,490		)	(2,276		)	(6,746		)	384			(5.69	)%
Net loss attributable to noncontrolling interests - Operating Partnership	5			—			14			—			4			1			25.00	%
Net loss attributable to controlling interests	(6,357		)	—			(19,476		)				(6,742		)	385			(5.71	)%
Preferred stock distributions	(25		)	—			(75		)	—			(25		)	—			—
Net loss attributable to common stockholders	$	(6,382	)	$	—		$	(19,551	)	$	—		$	(6,767	)	$	385		(5.69	)%
Loss per share - basic and diluted
Net loss attributable to common shares	$	(0.16	)	$	—		$	(0.50	)	$	—		$	(0.18	)	$	0.02		(11.11	)%
Weighted average common shares outstanding	39,095,200			—			39,198,239			—			39,318,318			(223,118		)	(0.57	)%
Comprehensive loss:
Net loss	$	(6,362	)	$	(1,672	)	$	(19,490	)	$	(2,276	)	$	(6,746	)	384			(5.69	)%
Other comprehensive loss:
Change in fair value of interest rate cap derivatives	(243		)	—			(243		)	—			—			(243		)	—
Other comprenhensive loss	$	(243	)	$	—		$	(243	)	$	—		$	—		$	(243	)	—
Comprehensive loss	(6,605		)	(1,672		)	(19,733		)	(2,276		)	(6,746		)	141			(2.09	)%
Less comprehensive loss attributable to noncontrolling interests - Operating Partnership	5			—			14			—			4			1			25.00	%
Comprehensive loss attributable to controlling interests	$	(6,600	)	$	(1,672	)	$	(19,719	)	$	(2,276	)	$	(6,742	)	$	142		(2.11	)%

Revenue

Total revenue increased $3.8 million, or 35.2%, in the third quarter of 2013 on a sequential quarter basis. Total revenue increased $13.7 million and $32.1 million for the three and nine months ended September 30, 2013, respectively, over the prior year periods. These increases are due primarily to the increase in the number of properties leased in the three and nine months ended September 30, 2013 as compared to prior periods. Our Predecessor did not have substantial operations through September 30, 2012 as it had only begun purchasing properties in February 2012.  We owned 4,521 leased properties as of September 30, 2013 as compared to 3,610 and 380 leased properties as of June 30, 2013 and September 30, 2012, respectively.   We achieved an average monthly rent for leased properties in our total portfolio of $1,161 and $1,148, respectively, in the third and second quarters of 2013.  The increase in the average monthly rent on a sequential quarter basis was primarily due to changes in portfolio mix. Throughout our lease-up phase, we made the strategic decision not to pursue significant rental increases on lease renewal in order to reduce potential turnover. As we near the end of our lease-up phase, we have begun pursuing more aggressive renewal increases and expect this strategy to have a more significant effect starting towards the end of the fourth quarter.

Expenses

Property Operating and Maintenance Expenses.  Property operating and maintenance expenses increased $1.7 million, or 68.4%, in the third quarter of 2013 on a sequential quarter basis and increased $3.6 million and $7.9 million for the three and nine months ended September 30, 2013, respectively, over the prior year periods.  Included in property operating and maintenance expenses are property insurance, bad debt, utilities and landscape maintenance on market ready properties not leased, repairs and maintenance on leased properties, and expenses associated with resident turnover.  The increase in this expense on a sequential quarter basis is largely attributable to the higher base of leased properties, an increase in the number of properties with resident turnover, and higher levels of repairs and maintenance and market ready expenses. We believe a portion of our property operating and maintenance expenses will decline as a percentage of revenue over time.  For example, certain repair needs, especially for HVAC and plumbing issues do not manifest until a resident begins living in a property. We believe these types of repairs and maintenance will normalize at

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reduced levels once our properties have been lived in for a period of time.  Additionally, we expect our market-ready costs related to utilities and landscaping to decline in markets where we have normalized levels of occupancy because our incurrence of these costs on turnover should be for a shorter duration and on fewer properties than during our initial stabilization phase. Increases in these expenses from prior year periods are attributable to the significant increase in the number of properties owned in the three and nine months ended September 30, 2013 as compared to prior year periods.

Real Estate Taxes and Homeowners’ Association Fees.  Real estate taxes and homeowners’ association fees are expensed once a property is market ready.  Real estate taxes increased $49,000, or 2.9%, in the third quarter of 2013 on a sequential quarter basis and increased $1.4 million and $4.4 million for the three and nine months ended September 30, 2013, respectively, over the prior year periods. The increases in real estate taxes are attributable to the increase in the number of properties owned and in-service in the three and nine months ended September 30, 2013 as compared to prior periods.  Homeowners’ association fees were flat in the third quarter of 2013 on a sequential quarter basis as substantially all properties located within homeowners’ associations were placed in-service by the second quarter of 2013.  Homeowners’ association fees increases of $131,000 and $685,000 for the three and nine months ended September 30, 2013, respectively, over the prior year periods were primarily attributable to the increases in the number of properties owned and placed into service.

Property Management.  We utilize a hybrid approach for property management, using our Manager’s operating subsidiary’s internal teams in Phoenix, Atlanta and Southeast Florida (representing approximately half of our properties owned) and using third parties in our other markets.

Expenses incurred for property management increased $608,000, or 19.8%, in the third quarter of 2013 on a sequential quarter basis and increased $3.6 million and $9.1 million for the three and nine months ended September 30, 2013, respectively, over the prior year periods. The sequential quarter increase in property management expenses was primarily due to a higher base of leased properties, and the associated increase in third-party fees of $157,000, an increase of $310,000 in acquisition team costs that could not be capitalized due to our reduced acquisition pace, and the cost drag related to the startup of our Southeast Florida internal office.   Additionally, included in property management for the third quarter is $410,000 of non-recurring software implementation costs related to a new property management system.   The increases in property management in the three and nine months ended September 30, 2013 compared to a year ago period were due to the same reasons as for the sequential quarter along with a change in the payment arrangement for property management services with our Manager’s operating subsidiary, which differs from our Predecessor’s prior arrangement of only paying property management fees based upon a percentage of rental income collected in the prior periods. Of the $3.7 million and $9.2 million in property management expenses incurred in the three and nine months ended September 30, 2013, approximately $3.0 million and $7.6 million were attributable to amounts owing to our Manager or Manager’s operating subsidiary for the following: the 5% property management fee described below, reimbursement of the costs of providing property management services in the markets it manages internally, and reimbursement of the costs of providing asset management and regional market oversight functions over both internal and third-party managed markets. The property management fees incurred in the three and nine months ended September 30, 2013 related to our Manager’s internal property management teams as a proportion of revenue for the period are not representative of a steady-state portfolio because of the need for a larger leasing infrastructure in our ramp up mode, because of certain non-recurring costs related to our property management software system implementation, and because our Manager’s existing oversight and internal property management infrastructure has capacity to support more leased and stabilized properties. We expect our leverage of the internal property management cost structure to improve as we reach steady-state operations and as we streamline our leasing operations.

Rather than compensating our Manager’s operating subsidiary with commissions or fees based on rental income, we reimburse all costs and expenses of our Manager’s operating subsidiary incurred on our behalf, including the compensation of its property management, project management and acquisition staff and related overhead, such as property management system costs.  In addition to these costs, we pay a property management fee to our Manager’s operating subsidiary equal to 5% of certain compensation and overhead costs incurred as a result of providing services to us, which reduces the amount of the advisory management fee paid to our Manager by the same amount. As a result of the pass-through arrangement under the property management and acquisition services agreement, the costs related to the property management, project management and acquisition services provided in the markets where our Manager’s operating subsidiary uses an internal team are largely tied to the compensation and related overhead of our Manager’s operating subsidiary’s property management and acquisitions staff as opposed to a fee based upon rented properties.

In addition to the $3.0 million and $7.6 million incurred for our Manager’s property management services in the three and nine months ended September 30, 2013, respectively, we incurred charges with the Manager’s operating subsidiary of $1.2 million and $3.9 million, respectively, in acquisition and project management fees related to renovation which were capitalized as part of property acquisition and renovation costs, and $70,000 and $170,000 for leasing services, respectively, which are reflected as other assets and are being amortized over the life of the related leases (typically one year).

The remaining amounts in property management fees of approximately $670,000 and $1.6 million for the three months and nine months ended September 30, 2013, respectively, were incurred to reimburse our Manager’s operating subsidiary for expenses payable to third-party property managers or as payments due directly to third-party property managers. This sequential quarter

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increase in third-party property management fees is attributable to the increase in rental income on properties managed by third parties during the three months ended September 30, 2013 as compared to the prior quarter.  Property management and acquisition fees in markets where we use third parties to perform services are based on our contractual arrangements with these third parties, which generally have one-year terms with month-to-month renewals.  Certain third parties providing acquisition services are paid a commission based upon properties acquired on our behalf.  Third-party property management arrangements include fees based on a percentage of rental income and other fees collected from our residents and, in some cases, fees for renovation oversight and leasing activities.

Depreciation and Amortization.  Depreciation and amortization includes depreciation on real estate assets placed in-service and amortization of deferred lease fees and in-place leases.  Depreciation and amortization increased $722,000, or 14.6%, on a sequential quarter basis, primarily as a result of the increased number of properties being depreciated in the third quarter of 2013.  Depreciation and amortization increased $5.2 million and $13.6 million, respectively, for the three and nine months ended September 30, 2013 over the prior year periods, primarily as a result of the increased number of properties placed in service and amortization of the Provident in-place leases acquired in the Formation Transactions.   We expect depreciation expense will increase in future periods as we continue to acquire additional properties and place them into service, while we expect amortization expense to decrease in future periods as the Provident in-place leases will fully amortize by the end of 2013.

Advisory Management Fee.  We rely on our Manager to provide or obtain on our behalf the personnel and services necessary for us to conduct our business because we have no employees of our own.  Our Manager performs these services for us, and together with our Manager’s operating subsidiary, provides us with a suite of investment, acquisition and property management services, utilizing the combined expertise of Pine River and Provident. We pay our Manager a quarterly advisory management fee equal to 0.375% (a 1.5% annual rate) of our average fully diluted market capitalization during the preceding quarter less any property management fee paid to our Manager’s operating subsidiary.

As part of the Formation Transactions, we are required to make payments of cash to both Two Harbors and the prior members of the Provident Entities as additional purchase price consideration.  The total amount to be paid to Two Harbors and the prior members of the Provident Entities is equal to 50% of the advisory management fee payable to the Manager during the first year after our initial public offering (before adjustment for the 5% property management fees received by our Manager’s operating subsidiary), subject to an aggregate amount payable to Two Harbors of no more than $4.0 million. The cash payments are required to be made quarterly in conjunction with the payment of the advisory management fee and reduce the amounts payable to our Manager by the same amount, thus the payments do not have a net impact on our obligations.  The amounts to be individually paid to Two Harbors and prior members of the Provident Entities is based upon the relative values they each provided as part of the Formation Transactions, which were approximately 73.6% and 26.4% respectively.  Advisory management fees, net of the 5% property management fee described above, decreased $412,000, or 16.0%, in the third quarter of 2013 on a sequential quarter basis as a result of a decline in our average fully diluted market capitalization due to the decline in our stock price in the third quarter of 2013.

During the three months ended September 30, 2013, we expensed $2.2 million in advisory management fees, net of the 5% property management fee.  This included $312,000 and $872,000, respectively, in advisory management fees to prior members of the Provident Entities and Two Harbors, as additional consideration, and $982,000 in advisory management fees to our Manager.

During the nine months ended September 30, 2013, we expensed $7.6 million in advisory management fees, net of the 5% property management fee. This included $1.1 million and $3.0 million, respectively, in advisory management fees to prior members of the Provident Entities and Two Harbors, as additional consideration, and $3.5 million in advisory management fees to our Manager.

Prior to the Formation Transactions, advisory management fees incurred by our Predecessor in the three and nine months ended September 30, 2012 were allocated from Two Harbors to our Predecessor based on 1.5% of contributed capital on an annualized basis and are not generally comparable to the advisory management fees incurred by us in the three and nine months ended September 30, 2013.   Advisory management fees paid by our Predecessor were $610,000 and $804,000, respectively, for the three and nine months ended September 30, 2012.

General and Administrative Expense.   General and administrative costs include those costs related to being a public company and costs incurred under the management agreement with our Manager. Under the management agreement, we pay all costs and expenses of our Manager incurred in the operation of its business, including all costs and expenses of running the company, all compensation costs (other than for our Chief Executive Officer and personnel providing data analytics directly supporting the investment function), and all costs under the shared services and facilities agreement between our Manager and Pine River. General and administrative expense decreased $83,000, or 4.3%, in the third quarter of 2013 on a sequential quarter basis as a result of a decline in certain public company costs due to timing and a reduction in certain consulting fees, offset by $200,000 in certain non-recurring legal and professional fees. General and administrative expense increased $1.8 million and $5.0 million for the three and nine months ended September 30, 2013, respectively, over the prior year periods as a result of increased reimbursement obligations to

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our Manager for compensation and other expenses in addition to increased public company expenses and professional fees.  Prior to the Formation Transaction, Two Harbors allocated certain direct general and administrative expenses (primarily professional fees and travel costs) to the Company.  General and administrative expenses incurred by our Predecessor prior to our Formation are not generally comparable to those we incur today.

Interest Expense.  Interest expense includes interest incurred on the outstanding balance of our revolving credit facility, an unused line fee on the undrawn amount of the revolving credit facility, and amortization of deferred financing fees, net of certain amounts capitalized for properties undergoing renovation activities.  Interest expense increased $831,000 or five-fold on a sequential quarter basis as a result of the increase in the amounts outstanding on the revolving credit facility.  The revolving credit facility was executed in late May 2013 and our Predecessor had no interest expense because it had no debt.

Income Taxes.  We intend to operate in a manner that will allow us to qualify for taxation as a REIT.  As a result of our expected REIT qualification, we do not generally expect to pay U.S. federal corporate level taxes. Many of the REIT requirements, however, are highly technical and complex.  If we were to fail to meet the REIT requirements, we would be subject to U.S. federal corporate income taxes.

Critical Accounting Policies

The preparation of financial statements in accordance with U.S. generally accepted accounting principles or GAAP requires us to make certain judgments and assumptions, based on information available at the time of our preparation of the financial statements, in determining accounting estimates used in preparation of the statements. Our significant accounting policies are described below:

Use of Estimates

Accounting estimates are considered critical if the estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made and if different estimates reasonably could have been used in the reporting period or changes in the accounting estimate are reasonably likely to occur from period to period that would have a material impact on our financial condition, results of operations or cash flows.

Real Estate Acquisition Valuation

Property acquired not subject to an existing lease is recorded at its purchase price, including acquisition costs, allocated between land and building based upon their fair values at the date of acquisition. Property acquired with an existing lease is recorded at fair value (which usually approximates the purchase price), allocated to land, building and the existing lease based upon their fair values at the date of acquisition, with acquisition costs expensed as incurred. In making our estimates of fair value for purposes of allocating purchase price, we utilize our own market knowledge and published market data. We are currently utilizing information obtained from county tax assessment records to develop regional averages to allocate the fair value to land and building. The estimated fair value of acquired in-place leases are the costs we would have incurred to lease the property at the date of acquisition, based upon our current leasing activity.

Impairment of Real Estate

We evaluate our long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. If an impairment indicator exists, we will compare the expected future undiscounted cash flows against the net carrying amount of a property. Significant indicators of impairment may include declines in homes values, rental rate and occupancy and significant changes in the economy. We plan to make our assessment at the individual property level because it represents the lowest level of cash flows. We will prepare our future undiscounted cash flow analysis using estimates based on current rental rates, renewals and occupancy and using inputs from our annual long-range planning process and historical performance.

When preparing these estimates, we will consider each property’s historical results, current operating trends,

current market conditions, anticipated future capital expenditures and remaining useful life. These estimates may be impacted by variable factors including inflation, expected rental rates, the general health of the economy and market competition. If the sum of the estimated undiscounted cash flows is less than the net carrying amount of the property, we will record an impairment loss for the difference between the estimated fair value of the individual property and the carrying amount of the property at that date. To determine the estimated fair value, we will consider both recent comparable homes sales and the use of discounted projected future cash flows. The rates used to discount projected future cash flows will reflect a weighted average cost of capital that a market participant would incur.

For long-lived assets to be disposed of, an impairment loss is recognized when the estimated fair value of the asset, less the estimated cost to sell, is less than the carrying amount of the asset at the time we have determined to sell the asset.  Long-lived assets

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held for sale and their related liabilities are separately reported, with the long-lived assets reported at the lower of their carrying amount or their estimated fair value, less their costs to sell and any operations associated with the properties is reflected as discontinued operations.  Assets held for sale are not depreciated nor are they included in our operating metrics at period end.

Depreciation of Investments in Real Estate

Building depreciation is computed on the straight-line basis over the estimated useful lives of the assets, which is generally 27.5 years, with no salvage value. The value of acquired in-place leases is amortized over the average remaining term of the respective in-place acquired lease, which is generally short term in nature (typically one year).

Revenue Recognition

We lease our single-family residences under operating leases. The lease periods will generally be short-term in nature (typically one year) and reflect market rental rates.  Generally, credit investigations are performed for prospective residents and security deposits are obtained. Rental income, net of concessions, is recognized on a straight-line basis over the term of the lease.

Capitalized Costs

We capitalize certain costs incurred in connection with successful property acquisitions and associated stabilization activities, including tangible property improvements and replacements of existing property components. Included in these capitalized costs are certain personnel costs associated with time spent by certain personnel in connection with the planning, execution and oversight of all capital additions activities at the property level as well as third-party acquisition agreement fees. Indirect costs are allocations of certain department costs, including personnel costs that directly relate to capital additions activities. We also capitalize property taxes and homeowners’ association dues during periods in which property stabilization is in progress up until the time a property is ready for its intended use. We capitalize certain costs through the renovation period and up until the time a property is ready for its intended use which is when it is ready to be placed on the market for lease and after such time such costs are expensed. We charge to expense as incurred costs that do not relate to capital additions activities, including ordinary repairs, maintenance, resident turnover costs and general and administrative expenses.

Recent Accounting Pronouncements

Under the Jumpstart Our Business Startups Act, or the JOBS Act, we meet the definition of an “emerging growth company.” We have irrevocably elected to opt out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. As a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, fund and maintain our assets and operations, make interest payments and distributions to our stockholders and other general business needs. Our liquidity, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond our control. Our near-term liquidity requirements consist primarily of purchasing our target assets, renovating properties, funding our operations, making interest payments and distributions to our stockholders.

Our liquidity and capital resources as of September 30, 2013 consisted of cash and cash equivalents of $53.5 million, escrow deposits of $22.7 million, and $55.3 million available under our revolving credit facility.  Escrow deposits primarily include refundable and non-refundable cash and earnest money on deposit with the Operating Partnership and certain third-party property managers for property purchases and renovation costs and at times monies held with certain municipalities for property purchases, and earnest money deposits.   Escrow deposits also include cash held in reserve at financial institutions, as required by our revolving credit facility. The Company had $12.6 million in cash reserves relating to the revolving credit facility as of September 30, 2013.  As of September 30, 2013, for properties acquired through individual broker transactions that involve submitting a purchase offer, we had offers accepted to purchase residential properties for an aggregate amount of $3.7 million, however not all of these properties are certain to be acquired because certain properties may fall out of escrow through the closing process for various reasons.

We believe the cash flows from operations together with current cash and cash equivalents and funds available under our revolving credit facility will be sufficient to fund the anticipated needs of our operations and fund any existing contractual obligations to purchase properties and renovate our portfolio of properties in 2013.  We may also opportunistically utilize the capital markets to raise additional capital and may incur additional debt in the future.

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Revolving Credit Facility

Certain of our subsidiaries currently have a $200.0 million revolving credit facility with Bank of America, National Association and JPMorgan Chase Bank, National Association. The revolving credit facility matures in May 2016 and bears interest at a varying rate of the London Interbank Offered Rate, or LIBOR, plus 3.50% subject to a LIBOR floor of 0.5%. At September 30, 2013, there was $144.7 million outstanding under the facility and $55.3 million available for borrowing.  We are able to draw up to 55% of the aggregate value of the eligible properties in the borrowing subsidiaries’ portfolios based on the lesser of (a) the value of the properties or (b) the original purchase price plus certain renovation and other capitalized costs of the properties.  Proceeds from the revolving credit facility may be used for the acquisition, financing, and renovation of properties, and other general purposes.

All amounts outstanding under the revolving credit facility are collateralized by the equity interests and assets of certain of our subsidiaries, or pledged subsidiaries. The amounts outstanding under the revolving credit facility and certain obligations contained therein are guaranteed by Silver Bay Realty Trust Corp. and the Operating Partnership only in the case of certain bad acts (including bankruptcy) and up to $20.0 million for completion of certain property renovations, as outlined in the credit documents. The pledged subsidiaries are required to pay certain commitment fees in connection with the revolving credit facility based upon the unused portion of the facility, certain fees assessed in connection with establishing the facility and other fees specified in the revolving credit facility documents.  The pledged subsidiaries are separate legal entities, but continue to be reported in the Company’s consolidated financial statements.  As long as the revolving credit facility is outstanding, the assets of the pledged subsidiaries are not available to satisfy the other debts and obligations of the pledged subsidiaries or the Company.  However the Company is permitted to receive distributions from the pledged subsidiaries as long as the Company and the pledged subsidiaries are current with all payments and in compliance with all other obligations under the revolving credit facility.

The revolving credit facility does not contractually restrict our ability to pay dividends but certain covenants contained therein may limit the amount of cash available for distribution. The revolving credit facility documents require us to meet certain quarterly financial tests pertaining to total liquidity and net worth and contain customary events of default for a facility of this type, including payment defaults, covenant defaults, breaches of representations and warranties, bankruptcy and insolvency, judgments, change of control and cross-default with certain other indebtedness.  We must maintain total liquidity of $25.0 million and a net worth of at least $125.0 million, excluding the assets of the borrowers, at all times.

During the third quarter of 2013, in connection with our revolving credit facility, we entered into interest rate cap agreements with an aggregate notional amount of $170.0 million and a LIBOR cap of 3.00% at an aggregate purchase price of $533,000 to manage interest rate risk associated with our revolving credit facility.

Operating Activities

Net cash used by operating activities in the nine months ended September 30, 2013 was $13.9 million compared to cash used by operating activities of $6.9 million for the nine months ended September 30, 2012.  Our operating cash flows during 2013 were impacted by our net loss and reserves provided under the revolving credit facility, offset partially by the depreciation and amortization and stock compensation add backs and an increase in accounts payable and accrued property expenses.  The 2012 operating cash flows were impacted by our Predecessor’s net loss and increase in escrow cash for operating activities, partially offset by the depreciation and amortization add back and increase in payables, yet on a smaller scale due to the startup of operations of our Predecessor in February 2012.

Investing Activities

Net cash used by investing activities in the nine months ended September 30, 2013 was $326.9 million and was primarily the result of us executing our acquisition and renovation strategies on newly acquired properties. We used $258.9 million for property acquisitions and another $82.9 million on capital improvements, of which $81.4 million was attributable to our initial renovation of properties, which includes properties purchased in a bulk purchase that have been renovated for the first time, and $1.5 million that was attributable to capital improvements made to properties that had been previously renovated. The average purchase price for properties was approximately $111,000 for all properties placed in service since our Predecessor commenced operations through September 30, 2013 and $110,000 for properties placed in service in the quarter ended September 30, 2013.

The average renovation cost per property was approximately $25,000 or 22.4% of the purchase price for all properties placed in service since our Predecessor commenced operations through September 30, 2013, including properties acquired with an in place lease but excluding properties acquired from the prior members of the Provident Entities. Our average renovation cost per property has trended up from the second quarter of 2013 for two reasons.  First, we are completing renovations on properties originally acquired with an in-place lease.  Second, as we are nearing the end of our initial stabilization phase the remaining properties in our portfolio have more substantial renovation needs. These renovation costs include capitalized expenditures for renovations, property taxes, homeowners’ association dues, interest, costs required to gain possession of the property and other capitalized expenditures until the property is ready for its intended use.

25

Net cash used by investing activities in the nine months ended September 30, 2012 was $191.9 million and was primarily the result of our Predecessor acquiring properties for its portfolio of $178.8 million and $12.6 million on capital improvements.

The acquisition of properties involves the outlay of capital beyond payment of the purchase price, including payments for property inspections, closing costs, title insurance, transfer taxes, recording fees, broker commissions, and property taxes or homeowners’ association dues in arrears. Typically, these costs are capitalized as components of the purchase price. We also make significant capital expenditures to renovate and maintain our properties to Silver Bay standards. Our ultimate success depends in part on our ability to make prudent, cost-effective decisions measured over the long term with respect to these expenditures.

As part of the Formation Transactions, we are required to make cash payments to both Two Harbors and the prior members of the Provident Entities as additional purchase price consideration in the Formation Transactions.  The total amount to be paid to Two Harbors and the prior members of the Provident Entities is equal to 50% of the advisory management fee payable to the Manager during the first year after the initial public offering, subject to an aggregate cap amount payable to Two Harbors of $4.0 million. As a result, as of September 30, 2013, we have an estimated remaining liability of $2.3 million as part of our Formation Transactions.  The Two Harbors deferred charge portion has been reflected as part of other assets and the Provident Entities portion is recorded as additional basis to the residential properties we acquired. The additional cash payments are required to be made quarterly in conjunction with the payment of the advisory management fee during 2013.

Financing Activities

Net cash provided by financing activities in the nine months ended September 30, 2013 was $166.1 million and was primarily attributable to proceeds from our revolving credit facility of $144.7 million and to a lesser extent the net proceeds from the exercise of the underwriters’ overallotment option in our initial public offering of $34.5 million, reduced by deferred financing fees of $4.0 million and $7.8 million in repurchases of our common stock.  We used these net proceeds from our revolving credit facility and the underwriters’ overallotment to invest in residential properties and for other general corporate purposes.  This compared to cash provided by financing activities in the nine months ended September 30, 2012 of $226.0 million that was the result of a capital contribution from our Predecessor’s parent.

The common units received by the prior members of the Provident Entities in connection with the Formation Transactions have the right to redeem all (but not less than all) of their common units for cash equal to the then-current value of an equal number of shares of our common stock, or, at the General Partner’s election on behalf of the Operating Partnership, to exchange their common units for shares of our common stock on a one-for-one basis, subject to certain adjustments and restrictions of ownership and transfer of our stock set forth in our charter. To the extent that we redeem the common units for cash, our liquidity will be decreased.

We have an obligation to pay dividends on our outstanding 10% cumulative redeemable preferred stock with a $1.0 million aggregate liquidation preference in preference to dividends paid on our common stock.

We have elected to be treated as a REIT for U.S. federal income tax purposes. As a REIT, under U.S. federal income tax law we will be required to distribute annually at least 90% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our REIT taxable income. Subject to the requirements of the Maryland General Corporation Law, we intend to pay quarterly dividends to our stockholders, if and to the extent authorized by our board of directors, which in the aggregate approximately equal our REIT taxable income in the relevant year.  As of September 30, 2013, we declared $387,000 in common stock dividends and $275 in distributions on the common units, which were paid on October 11, 2013.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We have not participated in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.

Aggregate Contractual Obligations

The following table summarizes certain contractual obligations for the periods noted:

(in thousands)	2013		Thereafter		Total
Purchase Obligations(1)	$	3,700			$	3,700
Debt Obligations(2)			144,700		144,700
Total	$	3,700	$	144,700	$	148,400

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(1)Reflects offers accepted but not closed, as of September 30, 2013, on purchase contracts for properties acquired through broker and bulk transactions that involve submitting a purchase offer. Not all of these properties are certain to be acquired as properties may fall out of escrow through the closing process for various reasons.

(2)Reflects amounts outstanding under our revolving credit facility.

Funds From Operations

Funds From Operations, or FFO, is a non-GAAP (in accordance with accounting principles generally accepted in the United States) financial measure that we believe, when considered with the financial statements determined in accordance with GAAP, is helpful to investors in understanding our 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, or NAREIT, defines FFO as net income (loss), computed in accordance with GAAP, excluding gains (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. We calculate FFO attributable to common stockholders (diluted) by subtracting, if dilutive, redemption or repurchase related preferred stock issuance costs and dividends on preferred stock and adding back dividends/distributions on dilutive preferred securities and premiums or discounts on preferred stock redemptions or repurchases.

FFO should not be considered an alternative to net income (loss) or net cash flows from operating activities, as determined in accordance with GAAP, as indications of our performance or as measures of liquidity. This non-GAAP measure is not necessarily indicative of cash available to fund future cash needs. In addition, although we use this non-GAAP measure for comparability in assessing our performance against other REITs, not all REITs compute the same non-GAAP measure.

Accordingly, there can be no assurance that our basis for computing this non-GAAP measure 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.  Real estate costs incurred in connection with real estate operations 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 affects FFO because costs that are accounted for as expenses reduce FFO.  Conversely, real estate costs associated with assets that are capitalized and then subsequently depreciated are added back to net income to calculate FFO.

The following table sets forth a reconciliation of the Company’s net loss as determined in accordance with GAAP and its calculation of FFO for the three and nine months ended September 30, 2013:

	Three Months Ended			Nine months ended
	September 30, 2013			September 30, 2013
Net loss attributable to common stockholders	$	(6,382	)	$	(19,551	)
Noncontrolling interests - Operating Partnership	(5		)	(14		)
Preferred distributions	25			75
Depreciation and amortization	5,683			14,061
Other	51			333
Funds from Operations	$	(628	)	$	(5,096	)

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Our future revenue, cash flows and fair values relevant to certain financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. The outstanding debt under our revolving credit facility has a variable interest rate.  We are therefore most vulnerable to changes in short-term LIBOR interest rates. During the third quarter of 2013, in connection with our revolving credit facility, we entered into interest rate cap agreements with an aggregate notional amount of $170.0 million and a LIBOR cap of 3.00% at an aggregate purchase price of $533,000 to manage interest rate risk associated with our revolving credit facility.  We do not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based on their credit rating and other factors. As of September 30, 2013, our total outstanding debt was approximately $144.7 million, all of which was variable rate debt borrowed under our revolving credit facility.

Item 4.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of September 30, 2013. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. We continue to review and document our disclosure controls and procedures, including our internal controls over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1.  Legal Proceedings

From time to time, we are party to claims and routine litigation arising in the ordinary course of our business, including disputes regarding title to or possession of individual properties in our portfolios. We do not believe that the results of any such claims or litigation individually, or in the aggregate, will have a material adverse effect on our business, financial position or results of operations.

Item 1A.  Risk Factors

There have been no material changes to the risk factors disclosed under the heading “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012 or Quarterly Report on Form 10-Q for the quarter ended March 31, 2013.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Use of Proceeds from Registered Securities

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares  Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs
July 1, 2013 — July 31, 2013	—	—		—	—
August 1, 2013 — August 31, 2013	424,842	$	15.5635	424,842	2,075,158
September 1, 2013 — September 30, 2013	75,158	$	15.5380	75,158	2,000,000
Total	500,000	$	15.5597	500,000	2,000,000

(1)These shares were repurchased and retired under the Company’s share repurchase program announced on July 1, 2013, pursuant to which the Company is authorized to repurchase up to 2,500,000 shares of its common stock.

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information

In the third quarter of 2013, we borrowed an aggregate amount of $65.9 million under our revolving credit facility described elsewhere in this Quarterly Report on Form 10-Q.

Item 6.  Exhibits

(a)The attached Exhibit Index is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		SILVER BAY REALTY TRUST CORP.
Date: November 7, 2013	By:	/s/ David N. Miller
		David N. Miller
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: November 7, 2013	By:	/s/ Christine Battist
		Christine Battist
		Chief Financial Officer and Treasurer
		(Principal Financial Officer and Principal Accounting Officer)

30

EXHIBIT INDEX

Exhibit		Incorporated by Reference
Number	Description	Form	File No.	Exhibit	Filing Date
2.1	Contribution Agreement by and among Silver Bay Realty Trust Corp., Silver Bay Operating Partnership L.P., and Two Harbors Operating Company LLC, dated December 4, 2012.	S-11/A	333-183838	2.1	December 12, 2012
2.2	Contribution Agreement by and among Silver Bay Realty Trust Corp., Silver Bay Operating Partnership L.P. and the members of Polar Cactus LLC, dated December 4, 2012.	S-11/A	333-183838	2.2	December 12, 2012
2.3	Contribution Agreement by and among Silver Bay Realty Trust Corp., Silver Bay Operating Partnership L.P. and the members of Polar Cactus II LLC, dated December 4, 2012.	S-11/A	333-183838	2.3	December 12, 2012
2.4	Contribution Agreement by and among Silver Bay Realty Trust Corp., Silver Bay Operating Partnership L.P. and the members of Cool Willow LLC, dated December 4, 2012.	S-11/A	333-183838	2.4	December 12, 2012
2.5	Agreement and Plan of Merger by and among Silver Bay Realty Trust Corp., Silver Bay Operating Partnership L.P., SB RESI I Merger Sub LLC and Provident Residential Real Estate Fund LLC, dated December 4, 2012.	S-11/A	333-183838	2.5	December 12, 2012
2.6	Agreement and Plan of Merger by and among Silver Bay Realty Trust Corp., Silver Bay Operating Partnership L.P., SB RESI II Merger Sub LLC and Resi II LLC.	S-11/A	333-183838	2.6	December 12, 2012
2.7	Representation, Warranty and Indemnification Agreement by and among Silver Bay Realty Trust Corp., Silver Bay Operating Partnership L.P. and Provident Real Estate Advisors LLC, dated December 4, 2012.	S-11/A	333-183838	2.7	December 12, 2012
3.1	Articles of Amendment and Restatement of Silver Bay Realty Trust Corp.	10-K	001-35760	3.1	March 1, 2013
3.2	Amended and Restated Bylaws of Silver Bay Realty Trust Corp.	S-11/A	333-183838	3.5	October 17, 2012
3.3	Articles Supplementary for Cumulative Redeemable Preferred Stock of Silver Bay Trust Corp.	10-K	001-35760	3.3	March 1, 2013
4.1	Specimen Common Stock Certificate of Silver Bay Realty Trust Corp.	S-11/A	333-183838	3.5	November 23, 2012
4.2	Instruments defining the rights of holders of securities: See Articles VI and VII of our Articles of Amendment and Restatement.	10-K	001-35760	4.2	March 1, 2013
4.3	Instruments defining the rights of holders of securities: See Article VII of our Amended and Restated Bylaws.	S-11/A	333-183838	3.5	October 17, 2012
4.4	Instruments defining the rights of holders of securities: See Article Second of our Articles Supplementary.	10-K	001-35760	4.4	March 1, 2013
10.1	Joinder Agreement dated as of June 28, 2013 adding new borrowers to the Revolving Credit Agreement dated as of May 10, 2013	10-Q	001-35760	10.3	August 8, 2013
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS†XBRL Instance Document

101.SCH†XBRL Taxonomy Extension Schema Document

101.CAL†XBRL Taxonomy Extension Calculation Linkbase Document

31

101.DEF†XBRL Taxonomy Extension Definition Linkbase Document

101.LAB†XBRL Taxonomy Extension Label Linkbase Document

101.PRE†XBRL Taxonomy Extension Presentation Linkbase Document

*Indicates a management contract or compensatory plan

†Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections

32

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a)

AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, David N. Miller, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Silver Bay Realty Trust Corp. (the “Registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [language omitted in accordance with SEC Release No. 34-54952] for the Registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) [Language omitted in accordance with SEC Release No. 34-54952];

c)Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

November 7, 2013	/s/ David N. Miller
	David N. Miller
	President and Chief Executive Officer

1

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a)

AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Christine Battist, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Silver Bay Realty Trust Corp. (the “Registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [language omitted in accordance with SEC Release No. 34-54952] for the Registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) [Language omitted in accordance with SEC Release No. 34-54952];

c)Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

November 7, 2013	/s/ Christine Battist
	Christine Battist
	Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Silver Bay Realty Trust Corp. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David N. Miller, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

November 7, 2013	/s/ David N. Miller
	David N. Miller
	President and Chief Executive Officer

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EX-32.2

Exhibit 32.2

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Silver Bay Realty Trust Corp. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christine Battist, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

November 7, 2013	/s/ Christine Battist
	Christine Battist
	Chief Financial Officer and Treasurer

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Subsequent Events

9 Months Ended

Sep. 30, 2013

Subsequent Events

Subsequent Events

Note 11.  Subsequent Events

Events subsequent to September 30, 2013 were evaluated through the date these financial statements were issued and no events were identified requiring further disclosure in these condensed consolidated financial statements.

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Condensed Consolidated Statements of Operations and Comprehensive Loss (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Revenue:
Rental income	$ 13,923	$ 726	$ 31,544	$ 811
Other income	563	20	1,340	22
Total revenue	14,486	746	32,884	833
Expenses:
Property operating and maintenance	4,280	638	8,624	774
Real estate taxes	1,761	406	4,893	526
Homeowners' association fees	286	155	847	162
Property management	3,675	55	9,173	64
Depreciation and amortization	5,683	449	14,061	481
Advisory management fee - affiliates	2,166	610	7,596	804
General and administrative	1,866	103	5,343	296
Interest expense	989		1,147
Other	142	2	690	2
Total expenses	20,848	2,418	52,374	3,109
Net loss	(6,362)	(1,672)	(19,490)	(2,276)
Net loss attributable to noncontrolling interests - Operating Partnership	5		14
Net loss attributable to controlling interests	(6,357)		(19,476)
Preferred stock distributions	(25)		(75)
Net loss attributable to common stockholders	(6,382)		(19,551)
Loss per share - basic and diluted (Note 7):
Net loss attributable to common shares (in dollars per share)	$ (0.16)		$ (0.50)
Weighted average common shares outstanding (in shares)	39,095,200		39,198,239
Comprehensive Loss:
Net loss	(6,362)	(1,672)	(19,490)	(2,276)
Other comprehensive loss:
Change in fair value of interest rate cap derivatives	(243)		(243)
Other comprehensive loss	(243)		(243)
Comprehensive loss	(6,605)	(1,672)	(19,733)	(2,276)
Less comprehensive loss attributable to noncontrolling interests - Operating Partnership	5		14
Comprehensive loss attributable to controlling interests	$ (6,600)	$ (1,672)	$ (19,719)	$ (2,276)

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Revolving Credit Facility

9 Months Ended

Sep. 30, 2013

Revolving Credit Facility

Revolving Credit Facility

Note 4.  Revolving Credit Facility

On May 10, 2013, the Company entered into a $200,000 revolving credit facility with a syndicate of banks.  The Company is able to draw up to 55% of the aggregate value of the eligible properties based on the lesser of (a) the third-party broker price opinion value or (b) the original purchase price plus certain renovation and other capitalized costs of the properties.  The revolving credit facility matures on May 10, 2016 and bears interest at a varying rate of the London Interbank Offered Rate, or LIBOR, plus 3.50% subject to a LIBOR floor of 0.5%.  The Company is also required to pay a monthly fee on the unused portion of the revolving credit facility at a rate of 0.5% per annum, which began to accrue 90 days following the closing of the revolving credit facility. The revolving credit facility may be used for the acquisition, financing, and renovation of properties and other general purposes. As of September 30, 2013, $144,734 was outstanding under the revolving credit facility and the weighted average interest rate for the three and nine months ended September 30, 2013 was 4.0%.

All amounts outstanding under the revolving credit facility are collateralized by the equity interests and assets of certain of the Company’s subsidiaries, or pledged subsidiaries. The amounts outstanding under the revolving credit facility and certain obligations contained therein are guaranteed by Silver Bay Realty Trust Corp. and the Operating Partnership only in the case of certain bad acts (including bankruptcy) and up to $20,000 for completion of certain property renovations, as outlined in the credit documents.

The pledged subsidiaries are separate legal entities, but continue to be reported in the Company’s consolidated financial statements.  As long as the revolving credit facility is outstanding, the assets of the pledged subsidiaries are not available to satisfy the other debts and obligations of the pledged subsidiaries or the Company.  However the Company is permitted to receive distributions from the pledged subsidiaries as long as the Company and the pledged subsidiaries are current with all payments and in compliance with all other obligations under the revolving credit facility.

The revolving credit facility does not contractually restrict the Company’s ability to pay dividends but certain covenants contained therein may limit the amount of cash available for distribution.  The revolving credit facility requires the Company to meet certain quarterly financial tests pertaining to net worth, total liquidity, debt yield and debt service coverage ratios, as defined by the agreement.  The Company must maintain, as defined by the agreement, total liquidity of $25,000 and a net worth of at least $125,000, excluding assets of the borrowers, at all times.  As of September 30, 2013, the Company satisfied the total liquidity requirement through maintaining a balance in excess of $25,000 in cash and cash equivalents at the Company and the Operating Partnership.  The revolving credit facility also provides for the restriction of cash whereby the Company must set aside funds for payment of insurance, property taxes and certain property operating and maintenance expenses associated with properties in the pledged subsidiaries portfolios.  As of September 30, 2013, the Company has $12,645 included in escrow deposits associated with the required reserves.  The agreement also contains customary events of default for a facility of this type, including payment defaults, covenant defaults, breaches of representations and warranties, bankruptcy and insolvency, judgments, change of control and cross-default with certain other indebtedness.

In connection with the revolving credit facility, the Manager’s operating subsidiary assigned the property management agreements it maintains with third parties to the Company. This means the Company will incur costs under those agreements in the future that are payable directly to the third parties as opposed to paying such amounts to the Manager’s operating subsidiary as reimbursement. The Manager’s operating subsidiary remains obligated to oversee and manage the performance of these property managers. The Company also entered into separate property management agreements with the Manager’s operating subsidiary covering the properties pledged as part of the revolving credit facility. Pursuant to these agreements, the Company pays a property management fee equal to 10% of collected rents, which reduces its reimbursement obligations by an equal amount thus resulting in no net impact to the amount the Company pays the Manager’s operating subsidiary for property management services.

The Company capitalizes interest for properties undergoing renovation activities.  Capitalized interest associated with the Company’s renovation activities totaled $542 and $837, respectively, for the three and nine months ended September 30, 2013.

Costs incurred in the placement of the Company’s debt are being amortized using the straight line method over the term of the related debt.  As of September 30, 2013, the Company has deferred financing costs of $3,485 in connection with its revolving credit facility, net of amortization.  Amortization expense for the three and nine months ended September 30, 2013 was $322 and $480 respectively and was recorded as interest expense in the accompanying consolidated statements of operations and comprehensive loss.

Interest Rate Cap Agreements

During the third quarter of 2013, the Company entered into interest rate cap agreements with an aggregate notional amount of $170,000, a LIBOR cap of 3.00%, and termination dates of May 10, 2016 at an aggregate purchase price of $533 to manage interest rate risk associated with its revolving credit facility.  The Company determined that the interest rate caps qualify for hedge accounting and, therefore, designated the derivatives as cash flow hedges with future changes in fair value recognized through other comprehensive loss.  Ineffectiveness is calculated as the amount by which the change in fair value of the derivatives exceeds the change in the fair value of the anticipated cash flows related to the revolving credit facility.

The fair value of the interest rate cap agreements is recorded within other assets and the effective portion of the change in fair value is reflected in accumulated other comprehensive loss in the condensed consolidated balance sheets.  Portions of the purchase prices of the interest rate cap agreements, representing the premiums paid to enter into the contracts, were capitalized as deferred financing costs and are being amortized using the straight line method over the terms of the related agreements.  The gains or losses on the interest rate cap agreements are recorded as interest expense in the condensed consolidated statement of operations and comprehensive loss in conjunction with the interest payments made in connection with the revolving credit facility.

As of September 30, 2013 the aggregate fair value of the Company’s interest rate cap agreements was $239 and was recorded in other assets.  For the three and nine months ended September 30, 2013, the Company did not recognize any gains or losses related to the interest rate cap agreements in earnings.

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Revolving Credit Facility (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended				5 Months Ended	0 Months Ended	3 Months Ended	5 Months Ended	9 Months Ended	3 Months Ended		5 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2013 Property Management Agreements	May 10, 2013 Revolving credit facility	Sep. 30, 2013 Revolving credit facility	Sep. 30, 2013 Revolving credit facility	Sep. 30, 2013 Revolving credit facility	Sep. 30, 2013 Revolving credit facility Interest rate cap agreements	Sep. 30, 2013 Revolving credit facility Company and the Operating Partnership	Sep. 30, 2013 Revolving credit facility Minimum
Revolving Credit Facility
Face amount of debt instruments						$ 200,000
Maximum amount allowed to be drawn under credit facility as a percentage of aggregate value of eligible properties								55.00%
Variable interest rate basis						LIBOR
Interest rate margin (as a percent)							3.50%	3.50%	3.50%
Interest rate, variable interest rate floor (as a percent)								0.50%
Monthly fee on the unused portion of the credit facility (as a percent)								0.50%
Period of accrual from closing of credit facility to pay monthly fee on unused portion of credit facility						90 days
Amount outstanding under the credit facility	144,734						144,734	144,734	144,734
Weighted average interest rate (as a percent)							4.00%		4.00%
Maximum amount guaranteed for completion of certain property renovations								20,000
Total liquidity to be maintained as defined by the agreement												25,000
Net worth to be maintained as defined by the agreement												125,000
Total liquidity requirement maintained	53,528	228,139	27,438	250							25,000
Escrow deposits							12,645	12,645	12,645
Property management fee as percentage of collected rents					10.00%
Capitalized interest costs associated with renovation activities							542		837
Deferred financing costs, net	3,485						3,485	3,485	3,485
Amortization expense	480						322		480
Aggregate notional amount										170,000
Variable interest rate basis										LIBOR
LIBOR cap (as a percent)										3.00%
Aggregate purchase price	533									533
Aggregate fair value										$ 239

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Basis of Presentation and New Accounting Pronouncements (Policies)

9 Months Ended

Sep. 30, 2013

Basis of Presentation and New Accounting Pronouncements

Consolidation and Basis of Presentation

Consolidation and Basis of Presentation

The interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles, or GAAP, have been condensed or omitted according to such SEC rules and regulations. Management believes, however, that the disclosures included in these interim condensed consolidated financial statements are adequate to make the information presented not misleading. The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.  In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at September 30, 2013 and results of operations for all periods presented have been made. The results of operations for the three or nine months ended September 30, 2013 should not be construed as indicative of the results to be expected for the full year.

The accompanying condensed consolidated financial statements include the accounts of all subsidiaries and intercompany accounts and transactions have been eliminated.  The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP.

Principles of Consolidation

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and Silver Bay Operating Partnership L.P., or the Operating Partnership. The Company consolidates real estate partnerships and other entities that are not variable interest entities when it owns, directly or indirectly, a majority voting interest in the entity or is otherwise able to control the entity.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that may affect the reported amounts and disclosures in the financial statements.  The Company’s estimates are inherently subjective in nature and actual results could differ from these estimates.

Reclassifications

Reclassifications

Certain reclassifications have been made to amounts in prior period financial statements to conform to current period presentation.  A balance of $24,653, representing cash in acquisition accounts, which are now in the control of the Company, has been reclassified from escrow deposits to cash and cash equivalents in the condensed consolidated balance sheet as of September 30, 2012.  This reclassification impacted the prior presentation in the condensed consolidated statement of cash flows for the nine months ended September 30, 2012.

Assets Held for Sale

Assets Held for Sale

The Company evaluates its long-lived assets on a regular basis to ensure the individual properties still meet its investment criteria. If the Company has determined that an individual property no longer meets its investment criteria, a decision is made to dispose of the property. The property is subject to the Company’s impairment test and any losses are recognized immediately. The property is then marketed for sale and classified as held for sale in the consolidated financial statements, with any material operations reported as discontinued operations.

The properties included in held for sale at September 30, 2013 did not have material leasing operations under the Company’s ownership.

For the three and nine months ended September 30, 2013, the Company recognized $206 and $518, respectively, in impairment charges and $156 and $185, respectively, in net gain on sale of assets.  Impairment and gain on sale of assets are included within other in the condensed consolidated statements of operations and comprehensive loss.  The Company did not record impairment or dispose of assets during the three and nine months ended September 30, 2012.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all demand deposits, money market accounts and investments in certificates of deposit purchased with a maturity of three months or less at the date of purchase to be cash equivalents.  The Company had no cash equivalents as of September 30, 2013 or December 31, 2012.

Escrow Deposits

Escrow Deposits

Escrow deposits include refundable and non-refundable cash and earnest money on deposit with the Manager’s operating subsidiary and certain third party property managers for property purchases and renovation costs, certain municipalities for property purchases, and earnest money deposits.  Escrow deposits also include cash held in reserve at financial institutions, as required by the revolving credit facility described below.  The Company had $12,645 in cash reserves relating to its revolving credit facility as of September 30, 2013.

Rent and Other Receivables, Net

Rent and Other Receivables, Net

The Company maintains an allowance for doubtful accounts for estimated losses that may result from the inability of residents to make required rent or other payments.  This allowance is estimated based on payment history and current occupancy status.  The Company generally does not require collateral or other security from its residents, other than security deposits.  If estimates of collectability differ from the cash received, the timing and amount of the Company’s reported revenue could be impacted.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Under the Jumpstart Our Business Startups Act, or the JOBS Act, the Company meets the definition of an “emerging growth company.” The Company has irrevocably elected to opt out of the extended transition period for complying with new or revised U.S. accounting standards pursuant to Section 107(b) of the JOBS Act. As a result, the Company will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.

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Stockholders' Equity (Details) (USD $)	0 Months Ended								9 Months Ended	12 Months Ended
	Oct. 11, 2013	Sep. 19, 2013	Jul. 12, 2013	Jun. 28, 2013	Jun. 26, 2013	Jun. 20, 2013	Apr. 12, 2013	Mar. 21, 2013	Sep. 30, 2013	Dec. 31, 2012
Stockholders' Equity
Cash dividend per share declared, common stock (in dollars per share)		$ 0.01				$ 0.01		$ 0.01
Cash dividend per share paid, common stock (in dollars per share)	$ 0.01		$ 0.01				$ 0.01
Cumulative redeemable preferred stock, stated dividend rate percentage (as a percent)									10.00%	10.00%
Cash dividend per share declared, preferred stock (in dollars per share)		$ 24.72			$ 25.00			$ 31.39
Cash dividend per share paid, preferred stock (in dollars per share)	$ 24.72			$ 25.00			$ 31.39

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Equity Incentive Plan (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2013
Property management
Equity incentive plan
Stock compensation expense	$ 62	$ 301
General administrative
Equity incentive plan
Stock compensation expense	$ 172	$ 450

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Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013
Concentrations
Aggregate amount of offers accepted to purchase residential properties	$ 3,659
Real estate properties | Geographically dispersed portfolio | Phoenix, AZ, Tampa, FL, and Atlanta, GA
Concentrations
Concentration (as a percent)	60.00%

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Equity Incentive Plan (Details) (Equity incentive plan, Independent directors, USD $) In Thousands, except Share data, unless otherwise specified	0 Months Ended	1 Months Ended	9 Months Ended
	May 22, 2013	May 31, 2013	Sep. 30, 2013
Restricted common stock
Equity incentive plan
Grant date fair market value of restricted stock awards	$ 50
Number of total shares issued	13,880
Vesting period	1 year
Common Stock
Equity incentive plan
Value of shares issued per director	25
Number of shares issued to directors for additional work	6,940
IPO proceeds offset as additional paid-in capital related to shares issued		$ 125	$ 125

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash Flows From Operating Activities:
Net loss	$ (19,490)	$ (2,276)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization	14,061	481
Non-cash stock compensation	746
Amortization of deferred financing costs	480
Other	333
Net change in assets and liabilities:
Increase in escrow reserves under the credit facility	(12,645)
Increase in escrow cash for operating activities	(1,282)	(8,319)
Increase in deferred lease fees and other assets	(377)	(601)
Increase in accounts payable, accrued property expenses, and prepaid rent	3,461	2,631
Increase in related party payables, net	855	1,193
Net cash used by operating activities	(13,858)	(6,891)
Cash Flows From Investing Activities:
Purchase of investments in real estate	(258,910)	(178,775)
Capital improvements of investments in real estate	(82,877)	(12,590)
Decrease (increase) in escrow cash for investing activities	10,975	(556)
Proceeds from sale of investments in real estate	4,195
Other	(252)
Net cash used by investing activities	(326,869)	(191,921)
Cash Flows From Financing Activities:
Proceeds from issuance of common stock, net of offering costs	34,513
Proceeds from revolving credit facility	144,734
Deferred financings costs paid	(3,965)
Interest rate cap agreements	(533)
Repurchase of common stock	(7,790)
Dividends paid	(843)
Capital contribution of parent, net		226,000
Net cash provided by financing activities	166,116	226,000
Net change in cash and cash equivalents	(174,611)	27,188
Cash and cash equivalents at beginning of period	228,139	250
Cash and cash equivalents at end of period	53,528	27,438
Supplemental disclosure of cash flow information:
Cash paid for interest	1,336
Board of directors stock compensation	125
Noncash investing and financing activities:
Common stock and unit dividends declared, but not paid	(387)
Advisory management fee - additional basis	1,071
Change in contingent consideration	222
Capital improvements in accounts payable	$ 2,796

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Basis of Presentation and New Accounting Pronouncements

9 Months Ended

Sep. 30, 2013

Basis of Presentation and New Accounting Pronouncements

Basis of Presentation and New Accounting Pronouncements

Note 2.  Basis of Presentation and New Accounting Pronouncements

Consolidation and Basis of Presentation

The interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles, or GAAP, have been condensed or omitted according to such SEC rules and regulations. Management believes, however, that the disclosures included in these interim condensed consolidated financial statements are adequate to make the information presented not misleading. The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.  In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at September 30, 2013 and results of operations for all periods presented have been made. The results of operations for the three or nine months ended September 30, 2013 should not be construed as indicative of the results to be expected for the full year.

The accompanying condensed consolidated financial statements include the accounts of all subsidiaries and intercompany accounts and transactions have been eliminated.  The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and Silver Bay Operating Partnership L.P., or the Operating Partnership. The Company consolidates real estate partnerships and other entities that are not variable interest entities when it owns, directly or indirectly, a majority voting interest in the entity or is otherwise able to control the entity.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that may affect the reported amounts and disclosures in the financial statements.  The Company’s estimates are inherently subjective in nature and actual results could differ from these estimates.

Reclassifications

Certain reclassifications have been made to amounts in prior period financial statements to conform to current period presentation.  A balance of $24,653, representing cash in acquisition accounts, which are now in the control of the Company, has been reclassified from escrow deposits to cash and cash equivalents in the condensed consolidated balance sheet as of September 30, 2012.  This reclassification impacted the prior presentation in the condensed consolidated statement of cash flows for the nine months ended September 30, 2012.

Assets Held for Sale

The Company evaluates its long-lived assets on a regular basis to ensure the individual properties still meet its investment criteria. If the Company has determined that an individual property no longer meets its investment criteria, a decision is made to dispose of the property. The property is subject to the Company’s impairment test and any losses are recognized immediately. The property is then marketed for sale and classified as held for sale in the consolidated financial statements, with any material operations reported as discontinued operations.

The properties included in held for sale at September 30, 2013 did not have material leasing operations under the Company’s ownership.

For the three and nine months ended September 30, 2013, the Company recognized $206 and $518, respectively, in impairment charges and $156 and $185, respectively, in net gain on sale of assets.  Impairment and gain on sale of assets are included within other in the condensed consolidated statements of operations and comprehensive loss.  The Company did not record impairment or dispose of assets during the three and nine months ended September 30, 2012.

Cash and Cash Equivalents

The Company considers all demand deposits, money market accounts and investments in certificates of deposit purchased with a maturity of three months or less at the date of purchase to be cash equivalents.  The Company had no cash equivalents as of September 30, 2013 or December 31, 2012.

Escrow Deposits

Escrow deposits include refundable and non-refundable cash and earnest money on deposit with the Manager’s operating subsidiary and certain third party property managers for property purchases and renovation costs, certain municipalities for property purchases, and earnest money deposits.  Escrow deposits also include cash held in reserve at financial institutions, as required by the revolving credit facility described below.  The Company had $12,645 in cash reserves relating to its revolving credit facility as of September 30, 2013.

Rent and Other Receivables, Net

The Company maintains an allowance for doubtful accounts for estimated losses that may result from the inability of residents to make required rent or other payments.  This allowance is estimated based on payment history and current occupancy status.  The Company generally does not require collateral or other security from its residents, other than security deposits.  If estimates of collectability differ from the cash received, the timing and amount of the Company’s reported revenue could be impacted.

Recent Accounting Pronouncements

Under the Jumpstart Our Business Startups Act, or the JOBS Act, the Company meets the definition of an “emerging growth company.” The Company has irrevocably elected to opt out of the extended transition period for complying with new or revised U.S. accounting standards pursuant to Section 107(b) of the JOBS Act. As a result, the Company will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.

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Equity Incentive Plan

9 Months Ended

Sep. 30, 2013

Equity Incentive Plan

Equity Incentive Plan

Note 5.  Equity Incentive Plan

On December 4, 2012 The Company adopted an equity incentive plan which provides incentive compensation to attract and retain qualified directors, officers, advisors, consultants and other personnel of the Company, the Manager and the Manager’s operating subsidiary.

On May 22, 2013, the Company awarded each of its independent directors an equity retainer in the form of an award of restricted stock with a fair market value of $50 through the issuance of 13,880 total shares.  This annual equity retainer for such independent directors will vest as to all of such shares on the earlier of (i) the one year anniversary of the date of grant or (ii) the date immediately preceding the date of the Company’s next annual meeting of stockholders, subject in each case, to the independent director’s continued service to the company through the vesting date.  On this date, the Company also awarded each independent director $25 in immediately vesting shares of the Company’s common stock, amounting to 6,940 total shares, in recognition of the additional work involved as independent directors of a new public company.

For the three and nine months ended September 30, 2013, inclusive of the impact of cash dividends, the Company recognized $62 and $301, respectively, of stock compensation expense in property management and $172 and $450, respectively, of stock compensation expense in general and administrative.  Additionally, the Company offset IPO proceeds of $125 as additional paid-in capital related to the shares issued to its independent directors for their additional work related to the Company’s initial public offering.

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Formation Transactions and Offering

9 Months Ended

Sep. 30, 2013

Formation Transactions and Offering

Formation Transactions and Offering

Note 3.  Formation Transactions and Offering

On December 19, 2012, the Company completed the Offering and raised approximately $228,517 in net proceeds through the issuance of 13,250,000 common shares.  On January 7, 2013, the Company sold an additional 1,987,500 common shares and received net proceeds of approximately $34,388, inclusive of the May 2013 $125 stock award to the Company’s independent directors described in Note 5, which off-set the proceeds.

Concurrently with the Offering, the Company also completed certain merger and formation transactions, or the Formation Transactions. Included in the Formation Transactions was the contribution of the ownership interest of the Predecessor by Two Harbors. For accounting purposes, the Predecessor was considered the acquiring or surviving entity, meaning the Silver Bay Property historical assets and liabilities included in the condensed consolidated balance sheets are recorded at the Predecessor’s historical carryover cost basis. In consideration for the contribution, Two Harbors received 17,824,647 shares of the Company’s common stock, and 1,000 shares of cumulative redeemable preferred stock with an aggregate liquidation preference of $1,000 per share.  On April 24, 2013, Two Harbors distributed by way of a special dividend all shares of the Company’s common stock to their stockholders on a pro rata basis.

The owners of the membership interests of entities managed by Provident Real Estate Advisors LLC, or the Provident Entities, contributed their interests in the Provident Entities, which owned 881 single-family properties, to the Company as part of the Formation Transactions.  The contribution of the Provident Entities was considered an acquisition for accounting purposes, resulting in the assets and liabilities of the Provident Entities being recorded at their fair value of $118,492.  In consideration for their contribution, the owners of the Provident Entities received 6,092,995 shares of the newly formed entity’s common stock, valued at $18.50 per share, $5,263 in cash (a use of net proceeds from the Offering), and 27,459 common units in the Operating Partnership, valued at $18.50 per unit because the common units are redeemable for cash or, at the Company’s election, shares of Company common stock on a one-for-one basis, subject to applicable adjustments.  The allocations of the purchase price for the Provident Entities were made in accordance with the Company’s allocation policies. There was no allocation of fair value for above or below market in-place leases based on the short-term nature of the leases and stated rates approximating current rental rates.

Certain working capital adjustments have been finalized as of September 30, 2013.  Included in the condensed consolidated balance sheets within amounts due previous owners is a $844 payable and $202 receivable from the prior members of the Provident Entities as of September 30, 2013 and December 31, 2012, respectively, and $1,261 due to Two Harbors as of December 31, 2012.  The Company will finalize the Provident Entities working capital position after the first anniversary of the Formation Transactions.  There were no working capital adjustments with Two Harbors as of September 30, 2013.  Any future working capital adjustments related to Silver Bay Property will be reflected as an adjustment to additional paid in capital and working capital adjustments related to the Provident Entities will be reflected as a basis adjustment to the single-family properties acquired.

In addition, the Company is required to make payments of cash to both Two Harbors and the prior members of the Provident Entities as additional purchase price consideration in the Formation Transactions. The total amount to be paid to Two Harbors and prior members of the Provident Entities is equal to 50% of the advisory management fee payable to the Manager, as described in Note 8, during the first year after the Offering (before adjustment for any property management fees received by the Manager’s operating subsidiary), subject to an aggregate amount payable to Two Harbors of no more than $4,024.  These payments reduce the amount owed to the Manager on a dollar-for-dollar basis and thus have no net impact on expenditures of the Company. The amounts to be individually paid to Two Harbors and prior members of the Provident Entities are based upon the relative values they each provided as part of the Formation Transactions, which were approximately 73.6% and 26.4%, respectively. As a result, as of September 30, 2013, the Company has an estimated remaining liability of $2,342 as part of its Formation Transactions.  The additional cash payments are required to be made quarterly in conjunction with the payment of the advisory management fee.

During the three and nine months ended September 30, 2013, the Company recorded advisory management fee expense of $2,166 and $7,596 (see Note 8), of which $872 and $2,991 relates to the amortization of the deferred charges for the Two Harbors component of the fee and $312 and $1,071 relates to the Provident Entities component of the fee, respectively.  Based upon Two Harbors’ assets being recorded at carryover basis, the estimated liability related to Two Harbors of $1,729 has been recorded as a deferred charge and included in other assets on the condensed consolidated balance sheets and will be amortized as advisory management fee expense ratably each quarter.  The estimated liability related to the Provident Entities of $613 has been recorded as additional basis to the single-family residential real properties acquired from the Provident Entities. Because these payments will be funded by the Manager through the reduction of its advisory management fee, the Company has determined that the full recognition of advisory management fee expense would still need to be recorded and will record the portion related to payments to the prior members of the Provident Entities through the recognition of additional paid-in capital, which amounted to $312 and $1,071 for the three and nine months ended September 30, 2013, respectively.

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Stockholders' Equity (Details 2) (USD $) In Thousands, except Share data, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Jul. 02, 2013
Share Repurchase Plan
Value of shares repurchased	$ 7,790
Share repurchase program
Share Repurchase Plan
Number of shares authorized to be repurchased		2,500,000
Number of shares repurchased	500,000
Value of shares repurchased	$ 7,790
Share price (in dollars per share)	$ 15.58

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Condensed Consolidated Balance Sheets
Cumulative redeemable preferred stock, stated dividend rate percentage (as a percent)	10.00%	10.00%
10% cumulative redeemable preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
10% cumulative redeemable preferred stock, shares authorized	50,000,000	50,000,000
10% cumulative redeemable preferred stock, shares issued	1,000	1,000
10% cumulative redeemable preferred stock, shares outstanding	1,000	1,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	450,000,000	450,000,000
Common stock, shares issued	38,812,821	37,328,213
Common stock, shares outstanding	38,812,821	37,328,213

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Related Party Transactions

9 Months Ended

Sep. 30, 2013

Related Party Transactions

Related Party Transactions

Note 8.  Related Party Transactions

Advisory Management Agreement

In conjunction with the Formation Transactions, the Company and the Manager entered into a new advisory management agreement, whereby the Manager designs and implements the Company’s business strategy and administers its business activities and day-to-day operations, subject to oversight by the Company’s board of directors.  In exchange for these services, the Manager earns a fee equal to 1.5% per annum, or 0.375% per quarter, of the Company’s daily average fully diluted market capitalization, as defined by the agreement, calculated and payable quarterly in arrears. The fee is reduced for the 5% property management fee (described below) received by the Manager’s operating subsidiary or its affiliates under the property management and acquisition services agreement. The Company will also reimburse the Manager for all expenses incurred on its behalf or otherwise in connection with the operation of its business, other than compensation for the Chief Executive Officer and personnel providing data analytics directly supporting the investment function.  If the Manager provides services to a party other than the Company or one of its subsidiaries, a portion of these expenses will be allocated to and reimbursed by such other party in a fair and equitable manner as determined by the Manager in good faith. To date, the Manager has only provided services to the Company.

The initial term of the advisory management agreement expires on December 19, 2015 and will be automatically renewed for a one year term at the end of the initial term and each anniversary thereafter unless terminated. Upon termination of the management agreement by the Company for reasons other than cause, or by the Manager for cause that the Company is unwilling or unable to timely cure, the Company will pay the Manager a termination fee equal to 4.5% of the daily average of the Company’s fully diluted market capitalization in the quarter preceding such termination.

During the three and nine months ended September 30, 2013, the Company expensed $982 and $3,534 respectively, in advisory management fees payable to the Manager (net of the reduction for the 5% property management fee described below).  As outlined in Note 3, the Company is required to make certain payments to Two Harbors and the prior members of the Provident Entities based upon 50% of the advisory management fee earned by the Manager during the first year subsequent to the Offering (before adjustment for any property management fees received by the Manager’s operating subsidiary). The Manager has agreed to fund these payments through the forgiveness of an equal portion of the advisory management fee by the Company during the same period. The Company expensed $1,184 and $4,062, respectively, in advisory management fees payable to Two Harbors and the prior members of the Provident Entities during the three and nine months ended September 30, 2013, and applied such payables as a reduction to advisory management fees to Manager. The remaining portion of the advisory management fee for these periods have been accrued and reflected in amounts due to the Manager and affiliates on the condensed consolidated balance sheets.

Prior to the Formation Transactions, Two Harbors allocated certain advisory expenses related to its operations based on 1.5% of member’s equity on an annualized basis.  During the three and nine months ended September 30, 2012, the Company incurred Two Harbors advisory fees totaling $610 and $804, respectively, which are included in advisory management fee — affiliate in the condensed consolidated statements of operations and comprehensive loss.

The Company also reimbursed the Manager for certain general and administrative expenses, primarily related to employee compensation. Direct and allocated costs incurred by the Manager on behalf of the Company, totaled approximately $978 and $2,797, respectively, for the three and nine months ended September 30, 2013. As of September 30, 2013 and December 31, 2012, the Company owed $1,111 and $1,609, respectively, for these costs including reimbursed offering costs (at December 31, 2012) in equity, which is included in amounts due to the Manager and affiliates in the condensed consolidated balance sheets.

Prior to the Formation Transaction, Two Harbors allocated certain direct general and administrative expenses (primarily professional fees and travel costs) paid on behalf of the Company to external vendors. For the three and nine months ended September 30, 2012, the Company was allocated $126 and $285, respectively, in direct expenses.

Property Management and Acquisition Services Agreement

In conjunction with the Formation Transactions, the Company entered into a new property management and acquisition services agreement with the Manager’s operating subsidiary. Under this agreement, the Manager’s operating subsidiary will acquire additional single-family properties on the Company’s behalf and manages the properties owned by the Company in select markets. For these services, the Company reimburses the Manager’s operating subsidiary for all direct expenses incurred in the operation of its business, including the compensation of its employees. The Manager’s operating subsidiary also receives a property management fee equal to 5% of certain costs and expenses incurred by it in the operation of its business that are reimbursed by the Company. This 5% property management fee reduces the advisory management fee paid to the Manager.

The Manager’s operating subsidiary has agreed not to provide these services to anyone other than the Company, its subsidiaries and any future joint venture in which the Company is an investor prior to December 19, 2015, the initial term of the agreement. The agreement will be automatically renewed for a one year term at the end of the initial term and each anniversary thereafter unless terminated.

During the three and nine months ended September 30, 2013, the Company incurred property management expense of $3,675 and $9,173, respectively.  This included direct expense reimbursements of $2,803 and $7,083, respectively, and the 5% property management fee of $202 and $529, respectively.  The remaining amounts in property management fees of approximately $670 and $1,561 for the three and nine months ended September 30, 2013, respectively, were incurred to reimburse our Manager’s operating subsidiary for expenses payable to third-party property managers or as payments due directly to third-party property managers. In addition, for the three and nine months ended September 30, 2013, the Company incurred charges with the Manager’s operating subsidiary of $1,209 and $3,852, respectively, in acquisitions and renovation fees which were capitalized as part of property acquisition and renovation costs, and $70 and $170, respectively, for leasing services, which are reflected as other assets and are being amortized over the life of the leases (typically one year or less).  As of September 30, 2013 and December 31, 2012, the Company owed $4,890 and $994 respectively for these services which are included in amounts due to the manager and affiliates on the condensed consolidated balance sheets.

Prior to the Formation Transactions, Two Harbors paid property management and acquisition service fees based on the number of homes acquired, leased and renovated in addition to a fee based on monthly rental income. Pursuant to these agreements, for the three and nine months ended September 30, 2012 the Company incurred $1,583 and $2,583, respectively, in acquisition and renovation fees which were capitalized as part of property acquisition and renovation costs, $90 and $127, respectively, for leasing services, which are deferred and amortized over the life of the leases (typically one year or less) and $35 and $41, respectively, for property management, which are included in property management on the condensed consolidated statements of operations and comprehensive loss.

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Condensed Consolidated Statements of Changes in Equity (USD $) In Thousands, except Share data, unless otherwise specified	Total	Parent Equity	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Loss	Cumulative Deficit	Total Stockholders' Equity	Noncontrolling interests - Operating Partnership
Balance at Dec. 31, 2011	$ 161	$ 250				$ (89)
Increase (Decrease) in Stockholders' Equity
Capital contributions	226,000	226,000
Net loss	(2,276)					(2,276)
Balance at Sep. 30, 2012	223,885	226,250				(2,365)
Balance at Dec. 31, 2012	659,413		372	664,146		(5,609)	658,909	504
Balance (in shares) at Dec. 31, 2012	37,328,213		37,328,213
Increase (Decrease) in Stockholders' Equity
Net proceeds from sale of common stock	34,388		20	34,368			34,388
Common stock issued (in shares)			1,987,500
Non-cash equity awards	404			404			404
Non-cash equity awards (in shares)			(2,892)
Repurchase of common stock	(7,790)		(5)	(7,785)			(7,790)
Repurchase of common stock (in shares)			(500,000)
Dividends declared	(1,243)					(1,243)	(1,243)
Other	1,072			1,072			1,072
Net loss	(19,490)					(19,476)	(19,476)	(14)
Other comprehensive loss	(243)				(243)		(243)
Balance at Sep. 30, 2013	$ 666,511		$ 387	$ 692,205	$ (243)	$ (26,328)	$ 666,021	$ 490
Balance (in shares) at Sep. 30, 2013	38,812,821		38,812,821

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Investments in real estate:
Land	$ 135,510	$ 82,310
Building and improvements	616,868	338,252
Investments in real estate, gross	752,378	420,562
Accumulated depreciation	(13,297)	(1,869)
Investments in real estate, net	739,081	418,693
Assets held for sale	7,450
Cash and cash equivalents	53,528	228,139
Escrow deposits	22,679	19,727
Resident security deposits	6,105	2,266
In-place lease and deferred lease costs, net	930	2,363
Deferred financing costs, net	3,485
Other assets	5,732	6,114
Total Assets	838,990	677,302
Liabilities:
Revolving credit facility	144,734
Accounts payable and accrued property expenses	10,169	4,550
Resident prepaid rent and security deposits	7,389	2,713
Amounts due to the manager and affiliates	6,001	3,071
Amounts due previous owners	3,186	6,555
Total Liabilities	171,479	16,889
10% cumulative redeemable preferred stock, $.01 par; 50,000,000 authorized, 1,000 issued and outstanding	1,000	1,000
Stockholders' Equity:
Common stock $.01 par; 450,000,000 shares authorized; 38,812,821 and 37,328,213, respectively shares issued and outstanding	387	372
Additional paid-in capital	692,205	664,146
Accumulated other comprehensive loss	(243)
Cumulative deficit	(26,328)	(5,609)
Total Stockholders' Equity	666,021	658,909
Noncontrolling interests - Operating Partnership	490	504
Total Equity	666,511	659,413
Total Liabilities and Equity	$ 838,990	$ 677,302

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Earnings (Loss) Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2013
Summary of the elements used in calculating basic and diluted EPS computations
Net loss attributable to controlling interests	$ (6,357)	$ (19,476)
Preferred stock distributions	(25)	(75)
Net loss attributable to common stockholders	$ (6,382)	$ (19,551)
Basic and diluted weighted average common shares outstanding	39,095,200	39,198,239
Net loss per common share - Basic and Diluted (in dollars per share)	$ (0.16)	$ (0.50)
Number of common units excluded from the calculation of diluted EPS as their inclusion would not be dilutive (in shares)		27,459

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Formation Transactions and Offering (Details) (USD $) In Thousands, except Share data, unless otherwise specified	0 Months Ended		3 Months Ended		9 Months Ended		1 Months Ended	9 Months Ended	0 Months Ended	3 Months Ended	9 Months Ended		0 Months Ended	3 Months Ended	9 Months Ended		9 Months Ended	0 Months Ended
	Jan. 07, 2013	Dec. 19, 2012	Sep. 30, 2013 item	Sep. 30, 2012	Sep. 30, 2013 item	Sep. 30, 2012	May 31, 2013 Equity incentive plan Common Stock Independent directors	Sep. 30, 2013 Equity incentive plan Common Stock Independent directors	Dec. 19, 2012 Provident Entities item	Sep. 30, 2013 Provident Entities	Sep. 30, 2013 Provident Entities	Dec. 31, 2012 Provident Entities	Dec. 19, 2012 Two Harbors	Sep. 30, 2013 Two Harbors	Sep. 30, 2013 Two Harbors	Dec. 31, 2012 Two Harbors	Sep. 30, 2013 Two Harbors and Provident Entities	Dec. 19, 2012 Common stock Provident Entities	Dec. 19, 2012 Common stock Two Harbors	Dec. 19, 2012 Cumulative redeemable preferred stock Two Harbors	Dec. 19, 2012 Common units in the Operating Partnership Provident Entities
Formation Transactions and Offering
Net proceeds through issuance of common shares in the Offering		$ 228,517
Shares of common stock issued	1,987,500	13,250,000
Net proceeds from sale of additional common shares	34,388				34,513
Formation Transactions and Offering
IPO proceeds offset as additional paid-in capital related to shares issued							125	125
Shares issued																		6,092,995	17,824,647	1,000	27,459
Liquidation preference per share (in dollars per share)																				$ 1,000
Number of single-family properties owned			5,575		5,575				881
Fair value of assets and liabilities acquired									118,492
Price of shares issued (in dollars per share)																		$ 18.50			$ 18.50
Cash paid									5,263
Conversion ratio of common units of the Operating Partnership into shares of common stock																					1
Amount receivable (payable) related to working capital adjustments										(844)	(844)	202		0	0	(1,261)
Percentage of advisory management fee payable in first year due as additional purchase price consideration																	50.00%
Maximum amount of additional purchase price consideration														4,024	4,024
Relative values provided as part of the Formation Transactions to determine amounts to be individually paid (as a percent)									26.40%				73.60%
Additional purchase price consideration due based on advisory management payable to the Manager for the period					1,072					312	1,071
Amortization of deferred charge recorded as advisory management fee expense														872	2,991
Advisory management fee expense			2,166	610	7,596	804
Estimated remaining liability related to Formation Transactions			2,342		2,342					613	613			1,729	1,729
Advisory management fee recognized as additional paid-in capital					$ 1,071					$ 312	$ 1,071

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Earnings (Loss) Per Share

9 Months Ended

Sep. 30, 2013

Earnings (Loss) Per Share

Earnings (Loss) Per Share

Note 7.  Earnings (Loss) Per Share

The following table presents a reconciliation of net loss and shares used in calculating basic and diluted earnings (loss) per share, or EPS, for the three and nine months ended September 30, 2013.  The Company has not calculated EPS for the comparable periods in 2012, as the Company did not have common stock outstanding until the Formation Transactions closed on December 19, 2012.

The following is a summary of the elements used in calculating basic and diluted EPS computations:

	Three Months Ended			Nine Months Ended
	September 30, 2013			September 30, 2013
Net loss attributable to controlling interests	$	(6,357	)	$	(19,476	)
Preferred stock distributions	$	(25	)	$	(75	)
Net loss attributable to common stockholders	$	(6,382	)	$	(19,551	)
Basic and diluted weighted average common shares outstanding	39,095,200			39,198,239
Net loss per common share - Basic and Diluted	$	(0.16	)	$	(0.50	)

A total of 27,459 common units were outstanding at September 30, 2013, but have been excluded from the calculation of diluted EPS as their inclusion would not be dilutive.

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Related Party Transactions (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended			3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended	12 Months Ended	3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended		3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended		3 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012	Sep. 30, 2012 Two Harbors	Sep. 30, 2012 Two Harbors	Sep. 30, 2013 Advisory Management Agreement Two Harbors and Provident Entities	Sep. 30, 2013 Advisory Management Agreement Two Harbors and Provident Entities	Sep. 30, 2012 Advisory Management Agreement Two Harbors	Sep. 30, 2012 Advisory Management Agreement Two Harbors	Dec. 19, 2012 Advisory Management Agreement Two Harbors	Sep. 30, 2012 Property Management and Acquisition Services Agreement Two Harbors	Sep. 30, 2012 Property Management and Acquisition Services Agreement Two Harbors	Sep. 30, 2012 Property Management and Acquisition Services Agreement Two Harbors Maximum	Sep. 30, 2012 Property Management and Acquisition Services Agreement Two Harbors Maximum	Sep. 30, 2013 Manager	Sep. 30, 2013 Manager	Dec. 31, 2012 Manager	Sep. 30, 2013 Manager Advisory Management Agreement	Sep. 30, 2013 Manager Advisory Management Agreement	Sep. 30, 2013 Manager's operating subsidiary Property Management and Acquisition Services Agreement	Sep. 30, 2013 Manager's operating subsidiary Property Management and Acquisition Services Agreement	Dec. 31, 2012 Manager's operating subsidiary Property Management and Acquisition Services Agreement	Sep. 30, 2013 Manager's operating subsidiary Property Management and Acquisition Services Agreement Maximum	Sep. 30, 2013 Manager's operating subsidiary Property Management and Acquisition Services Agreement Maximum
Related Party Transactions
Annual advisory management fee as a percentage of entity's daily average fully diluted market capitalization																					1.50%
Quarterly advisory management fee as a percentage of entity's daily average fully diluted market capitalization																					0.375%
Period for which agreement automatically renews unless terminated																					1 year		1 year
Percentage of advisory expenses allocated to the entity based on a percentage of the member's equity on an annualized basis												1.50%
Property Management Fee percentage, deducted from Advisory Fee																					5.00%
Termination fee as a percentage of daily average fully diluted market capitalization in quarter preceding termination																					4.50%
Advisory management fee expense	$ 2,166	$ 610	$ 7,596	$ 804						$ 610	$ 804									$ 982	$ 3,534
Percentage of advisory management fee payable in first year due as additional purchase price consideration									50.00%
Amount of advisory management fees offset with payments due to Two Harbors and the Provident Entities								1,184	4,062
Direct and allocated costs expensed																	978	2,797				2,803	7,083
Amounts due to the manager and affiliates	6,001		6,001		3,071												1,111	1,111	1,609			4,890	4,890	994
Direct expenses allocated related to professional fees and travel costs						126	285
Property management fee as a percentage of reimbursable costs and expenses incurred																							5.00%
Property management fee	3,675	55	9,173	64									35	41
5% property management fee included in property management and amounts due to the Manager and affiliates																						202	529
Portion of property management fee related to reimbursement of or direct payment due to third-party managers																						670	1,561
Acquisitions and renovation fees													1,583	2,583								1,209	3,852
Fee for leasing services													$ 90	$ 127								$ 70	$ 170
Amortization period for leases															1 year	1 year									1 year	1 year

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies

Commitments and Contingencies

Note 10.  Commitments and Contingencies

Concentrations

As of September 30, 2013, approximately 60% of the Company’s properties were located in Phoenix, AZ, Tampa, FL, and Atlanta, GA, which exposes the Company to greater economic risks than if owned on a more geographically dispersed portfolio.

Purchase Obligations

As of September 30, 2013, for properties acquired through individual broker transactions which involve submitting a purchase offer, the Company had offers accepted to purchase residential properties for an aggregate amount of $3,659.  However, not all of these properties are certain to be acquired because properties may fall out of escrow through the closing process for various reasons.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2013

Stockholders' Equity

Stockholders' Equity

Note 6.  Stockholders’ Equity

Common Stock Dividends

The following table presents cash dividends declared by the Company on its common stock since its formation:

Declaration Date	Record Date	Payment Date	Cash Dividend per Share
March 21, 2013	April 1, 2013	April 12, 2013	$	0.01
June 20, 2013	July 1, 2013	July 12, 2013	0.01
September 19, 2013	October 1, 2013	October 11, 2013	0.01

Preferred Stock Dividends

The following table presents cash dividends declared by the Company on its 10% cumulative redeemable preferred stock since its formation:

Declaration Date	Payment Date	Cash Dividend per Share
March 21, 2013	April 12, 2013	$	31.39
June 26, 2013	June 28, 2013	25.00
September 19, 2013	October 11, 2013	24.72

The March 21, 2013 dividend declaration included amounts relating to the period from the date of the Formation Transactions through April 12, 2013.

Share Repurchase Plan

On July 1, 2013, the Company’s Board of Directors authorized the Company to repurchase up to 2,500,000 shares of its common stock through a share repurchase program. Shares may be repurchased from time to time through privately negotiated transactions or open market transactions, pursuant to a trading plan in accordance with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended, or by any combination of such methods. The manner, price, number and timing of share repurchases will be subject to a variety of factors, including market conditions and applicable U.S. Securities and Exchange Commission rules.  As of September 30, 2013, 500,000 shares had been repurchased by the Company under the program and retired for a total cost of $7,790, at an average purchase price of $15.58.

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Organization and Operations

9 Months Ended

Sep. 30, 2013

Organization and Operations

Organization and Operations

Note 1.  Organization and Operations

Silver Bay Realty Trust Corp., or Silver Bay or the Company, is a Maryland corporation that is the continuation of the operations of Silver Bay Property Investment LLC (formerly Two Harbors Property Investment LLC), or Silver Bay Property or the Company’s Predecessor, through a contribution of equity interests in Silver Bay Property to the Company and an initial public offering on December 19, 2012, or the Offering, and certain Formation Transactions described in Note 3.  Until the Offering, Silver Bay Property was a wholly-owned subsidiary of Two Harbors Investment Corp., or Two Harbors or Parent.  The Company began formal operations in February 2012 when it started acquiring single-family properties financed through a parent capital contribution of $101,000.

The Company is focused on the acquisition, renovation, leasing and management of single-family residential properties in selected markets in the United States.  As of September 30, 2013, the Company owned 5,575 single-family residential properties, excluding assets held for sale.  The Company owns properties in Phoenix, AZ, Tucson, AZ, Northern California (currently consisting of Contra Costa, Napa, and Solano counties), Southern California (currently consisting of Riverside and San Bernardino counties), Orlando, FL, Tampa, FL, Southeast Florida (currently consisting of Miami-Dade, Broward and Palm Beach counties), Jacksonville, FL, Atlanta, GA, Las Vegas, NV, Charlotte, NC, Columbus, OH, Dallas, TX, and Houston, TX.

The Company has elected to be treated as a real estate investment trust, or REIT, for U.S. federal tax purposes, commencing with, and in connection with the filing of its federal tax return for the portion of its taxable year ended December 31, 2012. As a REIT, the Company will generally not be subject to federal income tax on the taxable income that it distributes to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax at regular corporate rates. Even if it qualifies for taxation as a REIT, the Company may be subject to some federal, state and local taxes on its income or property. In addition, the income of any taxable REIT subsidiary, or TRS, that the Company owns will be subject to taxation at regular corporate rates.

The Company is externally managed by PRCM Real Estate Advisers LLC, or the Manager. The Company relies on the Manager to provide or obtain on its behalf the personnel and services necessary for it to conduct its business as the Company has no employees of its own.

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2013

Common Stock Dividends

Stockholders' equity

Schedule of cash dividends declared by the Company since its formation

Declaration Date	Record Date	Payment Date	Cash Dividend per Share
March 21, 2013	April 1, 2013	April 12, 2013	$	0.01
June 20, 2013	July 1, 2013	July 12, 2013	0.01
September 19, 2013	October 1, 2013	October 11, 2013	0.01

Preferred Stock Dividends

Stockholders' equity

Schedule of cash dividends declared by the Company since its formation

Declaration Date	Payment Date	Cash Dividend per Share
March 21, 2013	April 12, 2013	$	31.39
June 26, 2013	June 28, 2013	25.00
September 19, 2013	October 11, 2013	24.72

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Fair Value

9 Months Ended

Sep. 30, 2013

Fair Value

Fair Value

Note 9.  Fair Value

Fair Value Measurements

Codification Topic Fair Value Measurements and Disclosures (“ASC 820”) established a three level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

Level 1 — Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 — Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Recurring Fair Value

The Company uses interest rate cap agreements to manage its exposure to interest rate risk, which are considered Level 2 instruments.  Interest rate cap derivatives are valued based on market quotes of comparable instruments.

Fair Value of Financial Instruments

In accordance with ASC 820, the Company is required to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized in the condensed consolidated balance sheets, for which fair value can be estimated.  The following describes the Company’s methods for estimating the fair value for financial instruments. Descriptions are not provided for those items that have zero balances as of September 30, 2013.

· Cash and cash equivalents, escrow deposits, resident security deposits, resident rent receivable (included in other assets), accounts payable and accrued property expenses, amounts due to the manager and affiliates, and amounts due previous owners have carrying values which approximate fair value because of the short-term nature of these instruments.  The Company categorizes the fair value measurement of these assets and liabilities as Level 1.

· The Company’s revolving credit facility has a floating interest rate based on an index plus a spread and the credit spread is consistent with those demanded in the market. Accordingly, the interest rate on this borrowing is at market and thus the carrying value of the debt approximates fair value. The Company categorizes the fair value measurement of this liability as Level 2.

· The Company’s preferred stock had a fair value which approximates its liquidation value at September 30, 2013.  The Company categorizes the fair value measurement of this instrument as Level 2.

Nonrecurring Fair Value

For long-lived assets to be disposed of, an impairment loss is recognized when the estimated fair value of the asset, less the estimated cost to sell, is less than the carrying amount of the asset at the time the Company has determined to sell the asset.  Assets held for sale are valued based on comparable sales data, less estimates of third-party broker commissions, which are gathered from the markets. These impairment measurements constitute nonrecurring fair value measures under ASC 820 and the inputs are characterized as Level 2.

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Basis of Presentation and New Accounting Pronouncements (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2013	Dec. 31, 2012
Basis of Presentation and New Accounting Pronouncements
Amount reclassified from escrow deposits to cash and cash equivalents		$ 24,653
Assets Held for Sale
Impairment charges	206	518
Net gain on sale of assets	156	185
Cash and Cash Equivalents
Cash equivalents	0	0	0
Escrow Deposits
Cash reserves relating to the revolving credit facility	$ 12,645	$ 12,645

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Earnings (Loss) Per Share (Tables)

9 Months Ended

Sep. 30, 2013

Earnings (Loss) Per Share

Summary of elements used in calculating basic and diluted EPS computations

	Three Months Ended			Nine Months Ended
	September 30, 2013			September 30, 2013
Net loss attributable to controlling interests	$	(6,357	)	$	(19,476	)
Preferred stock distributions	$	(25	)	$	(75	)
Net loss attributable to common stockholders	$	(6,382	)	$	(19,551	)
Basic and diluted weighted average common shares outstanding	39,095,200			39,198,239
Net loss per common share - Basic and Diluted	$	(0.16	)	$	(0.50	)

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Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 05, 2013
Document and Entity Information
Entity Registrant Name	SILVER BAY REALTY TRUST CORP.
Entity Central Index Key	0001557255
Document Type	10-Q
Document Period End Date	Sep. 30, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		38,807,848
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3

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Organization and Operations (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended		1 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2013 item	Feb. 29, 2012 Parent	Sep. 30, 2012 Parent
Organization and Operations
Number of single-family residential properties owned		5,575
Number of employees		0
Organization and operations
Capital contributions	$ 226,000		$ 101,000	$ 226,000