SUMMARIZED CONDENSED CONSOLIDATING INFORMATION

In connection with the offering of the Senior Notes by the Issuers in October 2010 and July 2012, the Company and certain 100% owned subsidiaries of the Company (the “Guarantors”) have, jointly and severally, fully and unconditionally guaranteed the Senior Notes, subject to release under certain customary circumstances as described below. These guarantees are subordinated to all existing and future senior debt and senior guarantees of the Guarantors and are unsecured. The Company conducts all of its business through and derives virtually all of its income from its subsidiaries. Therefore, the Company’s ability to make required payments with respect to its indebtedness (including the Senior Notes) and other obligations depends on the financial results and condition of its subsidiaries and its ability to receive funds from its subsidiaries.

A Guarantor will be automatically and unconditionally released from its obligations under the guarantees with respect to the Senior Notes in the event of:


•	Any sale of the subsidiary Guarantor or of all or substantially all of its assets;


•	A merger or consolidation of a subsidiary Guarantor with an issuer of the Senior Notes or another Guarantor, provided that the surviving entity remains a Guarantor;


•	A subsidiary Guarantor is declared “unrestricted” for covenant purposes under the Indenture;


•	The requirements for legal defeasance or covenant defeasance or to discharge the Indenture have been satisfied;


•	A liquidation or dissolution, to the extent permitted under the Indenture, of a subsidiary Guarantor; and


•	The release or discharge of the guaranty that resulted in the creation of the subsidiary guaranty, except a discharge or release by or as a result of payment under such guaranty.

Pursuant to Rule 3-10 of Regulation S-X, the following summarized consolidating information is provided for the Company (the “Parent Company”), the Issuers, the Guarantors, and the Company’s non-Guarantor subsidiaries with respect to the Senior Notes. This summarized financial information has been prepared from the books and records maintained by the Company, the Issuers, the Guarantors and the non-Guarantor subsidiaries. The summarized financial information may not necessarily be indicative of the results of operations or financial position had the Issuers, the Guarantors or non-Guarantor subsidiaries operated as independent entities. Sabra’s investments in its consolidated subsidiaries are presented based upon Sabra's proportionate share of each subsidiary's net assets. The Guarantor subsidiaries’ investments in the non-Guarantor subsidiaries and non-Guarantor subsidiaries’ investments in Guarantor subsidiaries are presented under the equity method of accounting. Intercompany activities between subsidiaries and the Parent Company are presented within operating activities on the condensed consolidating statement of cash flows.

Condensed consolidating financial statements for the Company and its subsidiaries, including the Parent Company only, the Issuers, the combined Guarantor subsidiaries and the combined non-Guarantor subsidiaries, are as follows:

CONDENSED CONSOLIDATING BALANCE SHEET

September 30, 2012

(in thousands, except share and per share amounts)

(unaudited)



	Parent Company			Issuers		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Assets
Real estate investments, net of accumulated depreciation	$	156		$	—	$	555,105	$	177,793	$	—		$	733,054
Loans receivable, net	—			—		22,092		—		—			22,092
Cash and cash equivalents	27,791			—		—		2,686		—			30,477
Restricted cash	—			—		—		5,197		—			5,197
Deferred tax assets	25,540			—		—		—		—			25,540
Prepaid expenses, deferred financing costs and other assets	671			7,487		15,057		3,436		—			26,651
Intercompany	—			240,816		—		34,527		(275,343		)	—
Investment in subsidiaries	341,804			435,430		25,119		—		(802,353		)	—
Total assets	$	395,962		$	683,733	$	617,373	$	223,639	$	(1,077,696	)	$	843,011
Liabilities and stockholders’ equity
Mortgage notes payable	$	—		$	—	$	—	$	157,513	$	—		$	157,513
Senior unsecured notes payable	—			330,861		—		—		—			330,861
Accounts payable and accrued liabilities	4,483			11,068		1,524		703		—			17,778
Tax liability	25,540			—		—		—		—			25,540
Intercompany	54,620			—		220,723		—		(275,343		)	—
Total liabilities	84,643			341,929		222,247		158,216		(275,343		)	531,692
Stockholders’ equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized, zero shares issued and outstanding as of September 30, 2012	—			—		—		—		—			—
Common stock, $.01 par value; 125,000,000 shares authorized, 37,051,242 shares issued and outstanding as of September 30, 2012	371			—		—		—		—			371
Additional paid-in capital	351,106			291,163		319,390		52,642		(663,195		)	351,106
Cumulative distributions in excess of net income	(40,158		)	50,641		75,736		12,781		(139,158		)	(40,158		)
Total stockholders’ equity	311,319			341,804		395,126		65,423		(802,353		)	311,319
Total liabilities and stockholders’ equity	$	395,962		$	683,733	$	617,373	$	223,639	$	(1,077,696	)	$	843,011

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2011

(in thousands, except share and per share amounts)



	Parent Company			Issuers		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Assets
Real estate investments, net of accumulated depreciation	$	187		$	—	$	474,256	$	183,934	$	—		$	658,377
Cash and cash equivalents	41,736			—		—		514		—			42,250
Restricted cash	—			—		—		6,093		—			6,093
Deferred tax assets	25,540			—		—		—		—			25,540
Prepaid expenses, deferred financing costs and other assets	874			5,079		8,544		2,893		—			17,390
Intercompany	—			145,018		—		25,237		(170,255		)	—
Investment in subsidiaries	313,181			391,131		23,611		—		(727,923		)	—
Total assets	$	381,518		$	541,228	$	506,411	$	218,671	$	(898,178	)	$	749,650
Liabilities and stockholders’ equity
Mortgage notes payable	$	—		$	—	$	—	$	158,398	$	—		$	158,398
Senior unsecured notes payable	—			225,000		—		—		—			225,000
Accounts payable and accrued liabilities	6,296			3,047		4,107		689		—			14,139
Tax liability	25,540			—		—		—		—			25,540
Intercompany	23,109			—		147,146		—		(170,255		)	—
Total liabilities	54,945			228,047		151,253		159,087		(170,255		)	423,077
Stockholders’ equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized, zero shares issued and outstanding as of December 31, 2011	—			—		—		—		—			—
Common stock, $.01 par value; 125,000,000 shares authorized, 36,891,712 shares issued and outstanding as of December 31, 2011	369			—		—		—		—			369
Additional paid-in capital	344,995			288,665		316,011		52,110		(656,786		)	344,995
Cumulative distributions in excess of net income	(18,791		)	24,516		39,147		7,474		(71,137		)	(18,791		)
Total stockholders’ equity	326,573			313,181		355,158		59,584		(727,923		)	326,573
Total liabilities and stockholders’ equity	$	381,518		$	541,228	$	506,411	$	218,671	$	(898,178	)	$	749,650

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Three Months Ended September 30, 2012

(in thousands, except share and per share amounts)

(unaudited)



	Parent Company		Issuers		Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Revenues:
Rental income	$	—	$	—	$	18,972		$	6,448	$	—		$	25,420
Interest income	7		—		611			—		—			618
Total revenues	7		—		19,583			6,448		—			26,038
Expenses:
Depreciation and amortization	12		—		5,446			2,038		—			7,496
Interest	—		6,162		708			2,668		—			9,538
General and administrative	3,627		—		133			18		—			3,778
Total expenses	3,639		6,162		6,287			4,724		—			20,812

Income (loss) in subsidiary	8,858		15,020		(52		)	—		(23,826		)	—
Net income	$	5,226	$	8,858	$	13,244		$	1,724	$	(23,826	)	$	5,226
Net income per common share, basic													$	0.14
Net income per common share, diluted													$	0.14
Weighted-average number of common shares outstanding, basic													37,178,162
Weighted-average number of common shares outstanding, diluted													37,465,114

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Three Months Ended September 30, 2011

(in thousands, except share and per share amounts)

(unaudited)



	Parent Company		Issuers		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Revenues:
Rental income	$	—	$	—	$	15,003	$	6,291	$	—		$	21,294
Interest income	12		—		163		1		—			176
Total revenues	12		—		15,166		6,292		—			21,470
Expenses:
Depreciation and amortization	13		—		4,763		2,074		—			6,850
Interest	—		4,755		336		2,533		—			7,624
General and administrative	2,104		—		2,522		26		—			4,652
Total expenses	2,117		4,755		7,621		4,633		—			19,126

Income in subsidiary	4,449		9,204		128		—		(13,781		)	—
Net income	$	2,344	$	4,449	$	7,673	$	1,659	$	(13,781	)	$	2,344
Net income per common share, basic												$	0.07
Net income per common share, diluted												$	0.07
Weighted-average number of common shares outstanding, basic												32,986,657
Weighted-average number of common shares outstanding, diluted												33,049,621

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Nine Months Ended September 30, 2012

(in thousands, except share and per share amounts)

(unaudited)



	Parent Company			Issuers		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Revenues:
Rental income	$	—		$	—	$	54,558	$	19,345	$	—		$	73,903
Interest income	15			—		964		—		—			979
Total revenues	15			—		55,522		19,345		—			74,882
Expenses:
Depreciation and amortization	36			—		16,170		6,150		—			22,356
Interest	—			15,675		1,887		7,822		—			25,384
General and administrative	10,548			2		971		67		—			11,588
Total expenses	10,584			15,677		19,028		14,039		—			59,328

Income in subsidiary	26,123			41,800		94		—		(68,017		)	—
Net income	$	15,554	—	$	26,123	$	36,588	$	5,306	$	(68,017	)	$	15,554
Net income per common share, basic													$	0.42
Net income per common share, diluted													$	0.42
Weighted-average number of common shares outstanding, basic													37,121,384
Weighted-average number of common shares outstanding, diluted													37,276,013

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Nine Months Ended September 30, 2011

(in thousands, except share and per share amounts)

(unaudited)



	Parent Company		Issuers		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Revenues:
Rental income	$	—	$	—	$	38,609	$	18,874	$	—		$	57,483
Interest income	53		—		338		2		—			393
Total revenues	53		—		38,947		18,876		—			57,876
Expenses:
Depreciation and amortization	42		—		12,874		6,311		—			19,227
Interest	—		14,157		981		7,588		—			22,726
General and administrative	7,419		1		2,733		92		—			10,245
Total expenses	7,461		14,158		16,588		13,991		—			52,198

Income in subsidiary	13,086		27,244		327		—		(40,657		)	—
Net income	$	5,678	$	13,086	$	22,686	$	4,885	$	(40,657	)	$	5,678
Net income per common share, basic												$	0.20
Net income per common share, diluted												$	0.20
Weighted-average number of common shares outstanding, basic												27,797,411
Weighted-average number of common shares outstanding, diluted												27,891,690

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Nine Months Ended September 30, 2012

(in thousands)

(unaudited)



	Parent Company			Issuers			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries				Elimination			Consolidated
Net cash provided by operating activities	$	44,798		$	—		$	—		$	3,104			$	—		$	47,902
Cash flows from investing activities:
Acquisitions of real estate	—			—			(98,050		)	—				—			(98,050		)
Origination of note receivable	—			—			(22,111		)	—				—			(22,111		)
Additions to real estate	(7		)	—			(1,032		)	—				—			(1,039		)
Investment in Subsidiary	(1,759		)	(1,759		)	—			—				3,518			—
Distribution from Subsidiary	345			345			—			—				(690		)	—
Intercompany financing	(20,764		)	(123,775		)	—			—				144,539			—
Net cash used in investing activities	(22,185		)	(125,189		)	(121,193		)	—				147,367			(121,200		)
Cash flows from financing activities:
Proceeds from secured revolving credit facility	—			—			42,500			—				—			42,500
Proceeds from mortgage notes payable	—			—			—			35,829				—			35,829
Proceeds from issuance of senior unsecured notes	—			106,000			—			—			—	—			106,000
Payments on secured revolving credit facility	—			—			(42,500		)	—				—			(42,500		)
Principal payments on mortgage notes payable	—			—			—			(36,701		)		—			(36,701		)
Payments of deferred financing costs	—			(2,989		)	(2,582		)	(1,474		)		—			(7,045		)
Issuance of common stock	144			—			—			—				—			144
Dividends paid	(36,702		)	—			—			—				—			(36,702		)
Contribution from Parent	—			1,759			—			1,759				(3,518		)	—
Distribution to Parent	—			(345		)	—			(345		)		690			—
Intercompany financing	—			20,764			123,775			—				(144,539		)	—
Net cash (used in) provided by financing activities	(36,558		)	125,189			121,193			(932		)		(147,367		)	61,525
Net (decrease) increase in cash and cash equivalents	(13,945		)	—			—			2,172				—			(11,773		)
Cash and cash equivalents, beginning of period	41,736			—			—			514				—			42,250
Cash and cash equivalents, end of period	$	27,791		$	—		$	—		$	2,686			$	—		$	30,477

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Nine Months Ended September 30, 2011

(in thousands)

(unaudited)



	Parent Company			Issuers			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Elimination			Consolidated
Net cash provided by operating activities	$	32,101		$	—		$	—		$	2,408		$	—		$	34,509
Cash flows from investing activities:
Acquisitions of real estate	—			—			(187,700		)	—			—			(187,700		)
Acquisition of note receivable	(5,348		)	—			—			—			—			(5,348		)
Additions to real estate	(86		)	—			—			—			—			(86		)
Investment in Subsidiary	(163,984		)	(50		)	—			—			164,034			—
Distribution from Subsidiary	3,307			3,307			—			—			(6,614		)	—
Intercompany financing	(24,261		)	(187,700		)	—			—			211,961			—
Net cash used in investing activities	(190,372		)	(184,443		)	(187,700		)	—			369,381			(193,134		)
Cash flows from financing activities:
Principal payments on mortgage notes payable	—			—			—			(2,249		)	—			(2,249		)
Payments of deferred financing costs	—			(495		)	—			—			—			(495		)
Issuance of common stock	163,431			—			—			—			—			163,431
Dividends paid	(19,878		)	—			—			—			—			(19,878		)
Contribution from Parent	—			163,984			—			50			(164,034		)	—
Distribution to Parent	—			(3,307		)	—			(3,307		)	6,614			—
Intercompany financing	—			24,261			187,700			—			(211,961		)	—
Net cash provided by (used in) financing activities	143,553			184,443			187,700			(5,506		)	(369,381		)	140,809
Net decrease in cash and cash equivalents	(14,718		)	—			—			(3,098		)	—			(17,816		)
Cash and cash equivalents, beginning of period	70,841			—			—			3,392			—			74,233
Cash and cash equivalents, end of period	$	56,123		$	—		$	—		$	294		$	—		$	56,417