SUMMARIZED CONSOLIDATING INFORMATION

In connection with the offering of the Senior Notes by the Issuers in October 2010, 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 governing the Senior Notes;


•	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 consolidating statement of cash flows.

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:

CONSOLIDATING BALANCE SHEET

December 31, 2012

(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	$	151		$	—	$	655,881	$	171,103	$	—		$	827,135
Loans receivable, net	—			—		12,017		—		—			12,017
Cash and cash equivalents	15,075			—		—		2,026		—			17,101
Restricted cash	—			—		92		4,497		—			4,589
Deferred tax assets	24,212			—		—		—		—			24,212
Assets held for sale, net	—			—		—		2,215		—			2,215
Prepaid expenses, deferred financing costs and other assets	1,315			7,339		18,133		2,826		—			29,613
Intercompany	125,596			227,396		—		37,466		(390,458		)	—
Investment in subsidiaries	166,632			266,975		23,142		—		(456,749		)	—
Total assets	$	332,981		$	501,710	$	709,265	$	220,133	$	(847,207	)	$	916,882
Liabilities and stockholders’ equity
Mortgage notes payable	$	—		$	—	$	—	$	152,322	$	—		$	152,322
Secured revolving credit facility	—			—		92,500		—		—			92,500
Senior unsecured notes payable	—			330,666		—		—		—			330,666
Accounts payable and accrued liabilities	3,281			4,412		3,348		653		—			11,694
Tax liability	24,212			—		—		—		—			24,212
Intercompany	—			—		390,458		—		(390,458		)	—
Total liabilities	27,493			335,078		486,306		152,975		(390,458		)	611,394
Stockholders’ equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized, zero shares issued and outstanding as of December 31, 2012	—			—		—		—		—			—
Common stock, $.01 par value; 125,000,000 shares authorized, 37,099,209 shares issued and outstanding as of December 31, 2012	371			—		—		—		—			371
Additional paid-in capital	353,861			107,939		136,666		53,952		(298,557		)	353,861
Cumulative distributions in excess of net income	(48,744		)	58,693		86,293		13,206		(158,192		)	(48,744		)
Total stockholders’ equity	305,488			166,632		222,959		67,158		(456,749		)	305,488
Total liabilities and stockholders’ equity	$	332,981		$	501,710	$	709,265	$	220,133	$	(847,207	)	$	916,882

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	$	178,934	$	—		$	653,377
Cash and cash equivalents	41,736			—		—		514		—			42,250
Restricted cash	—			—		—		6,093		—			6,093
Deferred tax assets	25,540			—		—		—		—			25,540
Assets held for sale, net	—			—		—		5,243		—			5,243
Prepaid expenses, deferred financing costs and other assets	874			5,079		8,544		2,650		—			17,147
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	$	—		$	—	$	—	$	153,942	$	—		$	153,942
Senior unsecured notes payable	—			225,000		—		—		—			225,000
Liabilities related to assets held for sale	—			—		—		4,485		—			4,485
Accounts payable and accrued liabilities	6,296			3,047		4,107		660		—			14,110
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

CONSOLIDATING STATEMENT OF INCOME

For the Year December 31, 2012

(in thousands, except share and per share amounts)



	Parent Company		Issuers		Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Revenues:
Rental income	$	—	$	—	$	75,606		$	26,136	$	—		$	101,742
Interest income	18		—		1,410			—		—			1,428
Total revenues	18		—		77,016			26,136		—			103,170
Expenses:
Depreciation and amortization	49		—		22,061			8,153		—			30,263
Interest	—		22,392		2,724			11,889		—			37,005
General and administrative	14,631		3		1,392			78		—			16,104
Impairment	—		—		—			2,481		—			2,481
Total expenses	14,680		22,395		26,177			22,601		—			85,853

Other income	—		—		—			2,196		—			2,196

Income (loss) in subsidiary	34,175		56,570		(3,693		)	—		(87,052		)	—
Net income	$	19,513	$	34,175	$	47,146		$	5,731	$	(87,052	)	$	19,513
Net income per common share, basic													$	0.53
Net income per common share, diluted													$	0.52
Weighted-average number of common shares outstanding, basic													37,061,111
Weighted-average number of common shares outstanding, diluted													37,321,517

CONSOLIDATING STATEMENT OF INCOME

For the Year December 31, 2011

(in thousands, except share and per share amounts)



	Parent Company		Issuers		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Revenues:
Rental income	$	—	$	—	$	55,447	$	25,231	$	—		$	80,678
Interest income	64		—		3,479		4		—			3,547
Total revenues	64		—		58,926		25,235		—			84,225
Expenses:
Depreciation and amortization	53		—		18,144		8,394		—			26,591
Interest	—		18,913		1,333		10,073		—			30,319
General and administrative	9,905		1		4,476		91		—			14,473
Total expenses	9,958		18,914		23,953		18,558		—			71,383

Income in subsidiary	22,736		41,650		493		—		(64,879		)	—

Net income	$	12,842	$	22,736	$	35,466	$	6,677	$	(64,879	)	$	12,842
Net income per common share, basic												$	0.43
Net income per common share, diluted												$	0.43
Weighted-average number of common shares outstanding, basic												30,109,417
Weighted-average number of common shares outstanding, diluted												30,171,225

CONSOLIDATING STATEMENT OF INCOME

For the Period from November 15, 2010 to December 31, 2010

(in thousands, except share and per share amounts)



	Parent Company		Issuers		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Revenues:
Rental income	$	—	$	—	$	5,635	$	3,146	$	—		$	8,781
Interest income	12		—		—		2		—			14
Total revenues	12		—		5,635		3,148		—			8,795
Expenses:
Depreciation and amortization	—		—		2,031		1,103		—			3,134
Interest	—		2,470		151		1,238		—			3,859
General and administrative	1,543		—		—		10		—			1,553
Total expenses	1,543		2,470		2,182		2,351		—			8,546

Income in subsidiary	1,780		4,250		227		—		(6,257		)	—

Income before income taxes	249		1,780		3,680		797		(6,257		)	249
Income tax expense	242		—		—		—		—			242
Net income	$	7	$	1,780	$	3,680	$	797	$	(6,257	)	$	7
Net income per common share, basic												$	—
Net income per common share, diluted												$	—
Weighted-average number of common shares outstanding, basic												25,110,936
Weighted-average number of common shares outstanding, diluted												25,186,988

CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2012

(in thousands)



	Parent Company			Issuers			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Elimination			Consolidated
Net cash provided by operating activities	$	53,584		$	—		$	—		$	2,668		$	—		$	56,252
Cash flows from investing activities:
Acquisitions of real estate	—			—			(205,424		)	—			—			(205,424		)
Origination of note receivable	—			—			(22,180		)	—			—			(22,180		)
Additions to real estate	(14		)	—			(1,032		)	—			—			(1,046		)
Repayment of note receivable	—			—			10,000			—			—			10,000
Investment in Subsidiary	(7,191		)	(7,191		)	—			—			14,382			—
Distribution from Subsidiary	1,751			1,751			—			—			(3,502		)	—
Intercompany financing	(25,915		)	(128,721		)	—			—			154,636			—
Net cash used in investing activities	(31,369		)	(134,161		)	(218,636		)	—			165,516			(218,650		)
Cash flows from financing activities:
Proceeds from secured revolving credit facility	—			—			135,000			—			—			135,000
Proceeds from mortgage notes payable	—			—			—			56,651			—			56,651
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	—			—			—			(62,226		)	—			(62,226		)
Payments of deferred financing costs	—			(3,194		)	(2,585		)	(1,021		)	—			(6,800		)
Issuance of common stock	53			—			—			—			—			53
Dividends paid	(48,929		)	—			—			—			—			(48,929		)
Contribution from Parent	—			7,191			—			7,191			(14,382		)	—
Distribution to Parent	—			(1,751		)	—			(1,751		)	3,502			—
Intercompany financing	—			25,915			128,721			—			(154,636		)	—
Net cash (used in) provided by financing activities	(48,876		)	134,161			218,636			(1,156		)	(165,516		)	137,249
Net (decrease) increase in cash and cash equivalents	(26,661		)	—			—			1,512			—			(25,149		)
Cash and cash equivalents, beginning of period	41,736			—			—			514			—			42,250
Cash and cash equivalents, end of period	$	15,075		$	—		$	—		$	2,026		$	—		$	17,101

CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2011

(in thousands)



	Parent Company			Issuers			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Elimination			Consolidated
Net cash provided by operating activities	$	41,298		$	—		$	—		$	3,407		$	—		$	44,705
Cash flows from investing activities:
Acquisitions of real estate	—			—			(204,500		)	—			—			(204,500		)
Acquisition of note receivable	(5,348		)	—			—			—			—			(5,348		)
Additions to real estate	(86		)	—			—			—			—			(86		)
Repayment of note receivable	5,348			—			—			—			—			5,348
Investment in Subsidiary	(164,030		)	(96		)	—			—			164,126			—
Distribution from Subsidiary	3,307			3,307			—			—			(6,614		)	—
Intercompany financing	(41,196		)	(204,700		)	—			—			245,896			—
Net cash used in investing activities	(202,005		)	(201,489		)	(204,500		)	—			403,408			(204,586		)
Cash flows from financing activities:
Principal payments on mortgage notes payable	—			—			—			(3,027		)	—			(3,027		)
Payments of deferred financing costs	—			(430		)	(200		)	(47		)	—			(677		)
Issuance of common stock	163,242			—			—			—			—			163,242
Dividends paid	(31,640		)	—			—			—			—			(31,640		)
Contribution from Parent	—			164,030			—			96			(164,126		)	—
Distribution to Parent	—			(3,307		)	—			(3,307		)	6,614			—
Intercompany financing	—			41,196			204,700			—			(245,896		)	—
Net cash provided by (used in) financing activities	131,602			201,489			204,500			(6,285		)	(403,408		)	127,898
Net decrease in cash and cash equivalents	(29,105		)	—			—			(2,878		)	—			(31,983		)
Cash and cash equivalents, beginning of period	70,841			—			—			3,392			—			74,233
Cash and cash equivalents, end of period	$	41,736		$	—		$	—		$	514		$	—		$	42,250

CONSOLIDATING STATEMENT OF CASH FLOWS

For the Period from November 15, 2010 to December 31, 2010

(in thousands, except share and per share amounts)



	Parent Company			Issuers			Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries			Elimination			Consolidated
Net cash provided by operating activities	$	5,844		$	—		$	—	$	748		$	—		$	6,592
Cash flows from investing activities:
Cash received in the Separation	63,747			—			—		3,387			—			67,134
Additions to real estate	(16		)	—			—		—			—			(16		)
Intercompany financing	10,355			10,355			—		—			(20,710		)	—
Net cash provided by investing activities	74,086			10,355			—		3,387			(20,710		)	67,118
Cash flows from financing activities:
Proceeds from notes payables	—			—			—		10,000			—			10,000
Payment of Separation-related obligations	(8,928		)	—			—		(153		)	—			(9,081		)
Intercompany financing	—			(10,355		)	—		(10,355		)	20,710			—
Principal payments on mortgage notes payable	—			—			—		(235		)	—			(235		)
Payments of deferred financing costs	(161		)	—			—		—			—			(161		)
Net cash provided by (used in) financing activities	(9,089		)	(10,355		)	—		(743		)	20,710			523
Net increase in cash and cash equivalents	70,841			—			—		3,392			—			74,233
Cash and cash equivalents, beginning of period	—			—			—		—			—			—
Cash and cash equivalents, end of period	$	70,841		$	—		$	—	$	3,392		$	—		$	74,233