SUMMARIZED CONDENSED CONSOLIDATING INFORMATION

In connection with the offerings of the Senior Notes by the Issuers and the Issuers’ previous offerings of the 2018 Notes (which were no longer outstanding as of September 30, 2014), 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 Senior Notes Indentures;


•	The requirements for legal defeasance or covenant defeasance or to discharge the Senior Notes Indentures have been satisfied;


•	A liquidation or dissolution, to the extent permitted under the Senior Notes Indentures, 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 condensed 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, 2014

(in thousands)

(unaudited)



	Parent Company		Issuers		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Assets
Real estate investments, net of accumulated depreciation	$	63	$	—	$	1,426,998	$	141,207	$	—		$	1,568,268
Loans receivable and other investments, net	—		—		250,674		—		—			250,674
Cash and cash equivalents	21,475		—		—		4,004		—			25,479
Restricted cash	—		—		160		6,377		—			6,537
Deferred tax assets	24,212		—		—		—		—			24,212
Prepaid expenses, deferred financing costs and other assets	977		20,920		112,615		7,684		—			142,196
Intercompany	230,614		965,828		—		—		(1,196,442		)	—
Investment in subsidiaries	417,157		602,179		24,887		—		(1,044,223		)	—
Total assets	$	694,498	$	1,588,927	$	1,815,334	$	159,272	$	(2,240,665	)	$	2,017,366

Liabilities
Mortgage notes	$	—	$	—	$	—	$	124,714	$	—		$	124,714
Revolving credit facility	—		614,000		—		—		—			614,000
Senior unsecured notes	—		550,000		—		—		—			550,000
Accounts payable and accrued liabilities	6,536		7,770		24,864		1,549		—			40,719
Tax liability	24,212		—		—		—		—			24,212
Intercompany	—		—		1,191,119		5,323		(1,196,442		)	—
Total liabilities	30,748		1,171,770		1,215,983		131,586		(1,196,442		)	1,353,645
Total equity	663,750		417,157		599,351		27,686		(1,044,223		)	663,721
Total liabilities and equity	$	694,498	$	1,588,927	$	1,815,334	$	159,272	$	(2,240,665	)	$	2,017,366

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2013

(in thousands)



	Parent Company		Issuers		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Assets
Real estate investments, net of accumulated depreciation	$	101	$	—	$	751,771	$	163,546	$	—		$	915,418
Loans receivable and other investments, net	—		—		185,293		—		—			185,293
Cash and cash equivalents	3,551		—		—		757		—			4,308
Restricted cash	—		—		121		5,231		—			5,352
Deferred tax assets	24,212		—		—		—		—			24,212
Prepaid expenses, deferred financing costs and other assets	1,217		9,207		46,694		6,134		—			63,252
Intercompany	63,125		270,194		—		42,637		(375,956		)	—
Investment in subsidiaries	398,640		537,505		25,205		—		(961,350		)	—
Total assets	$	490,846	$	816,906	$	1,009,084	$	218,305	$	(1,337,306	)	$	1,197,835

Liabilities
Mortgage notes	$	—	$	—	$	—	$	141,328	$	—		$	141,328
Secured revolving credit facility	—		—		135,500		—		—			135,500
Senior unsecured notes	—		414,402		—		—		—			414,402
Accounts payable and accrued liabilities	6,470		3,864		11,008		887		—			22,229
Tax liability	24,212		—		—		—		—			24,212
Intercompany	—		—		375,956		—		(375,956		)	—
Total liabilities	30,682		418,266		522,464		142,215		(375,956		)	737,671
Total equity	460,164		398,640		486,620		76,090		(961,350		)	460,164
Total liabilities and equity	$	490,846	$	816,906	$	1,009,084	$	218,305	$	(1,337,306	)	$	1,197,835

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Three Months Ended September 30, 2014

(dollars in thousands, except per share amounts)

(unaudited)



	Parent Company			Issuers		Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Revenues:
Rental income	$	—		$	—	$	33,290		$	4,875	$	—		$	38,165
Interest and other income	2			—		5,141			676		—			5,819
Total revenues	2			—		38,431			5,551		—			43,984
Expenses:
Depreciation and amortization	13			—		8,288			1,461		—			9,762
Interest	—			8,435		749			1,356		—			10,540
General and administrative	3,573			—		2,133			520		—			6,226
Total expenses	3,586			8,435		11,170			3,337		—			26,528

Other (expense) income:
Loss on extinguishment of debt	—			—		(158		)	—		—			(158		)
Other income (expense)	—			—		(100		)	—		—			(100		)

Total other (expense) income	—			—		(258		)	—		—			(258		)

Income in subsidiary	20,788			29,223		1,304			—		(51,315		)	—

Net income	17,204			20,788		28,307			2,214		(51,315		)	17,198

Net loss attributable to noncontrolling interests	—			—		—			6		—			6

Net income attributable to Sabra Health Care REIT, Inc.	17,204			20,788		28,307			2,220		(51,315		)	17,204

Preferred stock dividends	(2,561		)	—		—			—		—			(2,561		)

Net income attributable to common stockholders	$	14,643		$	20,788	$	28,307		$	2,220	$	(51,315	)	$	14,643

Net income attributable to common stockholders, per:
Basic common share														$	0.31
Diluted common share														$	0.31
Weighted-average number of common shares outstanding, basic														47,359,949
Weighted-average number of common shares outstanding, diluted														47,877,202

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Three Months Ended September 30, 2013

(dollars in thousands, except per share amounts)

(unaudited)



	Parent Company			Issuers		Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Revenues:
Rental income	$	—		$	—	$	24,380		$	7,319	$	—		$	31,699
Interest and other income	13			—		1,214			—		—			1,227
Total revenues	13			—		25,594			7,319		—			32,926
Expenses:
Depreciation and amortization	13			—		6,365			1,880		—			8,258
Interest	—			7,147		817			1,775		—			9,739
General and administrative	2,996			—		41			20		—			3,057
Total expenses	3,009			7,147		7,223			3,675		—			21,054

Other (expense) income:
Loss on extinguishment of debt	—			—		(351		)	—		—			(351		)
Other income (expense)	—			—		300			—		—			300

Total other (expense) income	—			—		(51		)	—		—			(51		)

Income in subsidiary	14,817			21,964		982			—		(37,763		)	—

Net income	11,821			14,817		19,302			3,644		(37,763		)	11,821

Preferred dividends	(2,579		)	—		—			—		—			(2,579		)

Net income attributable to common stockholders	$	9,242		$	14,817	$	19,302		$	3,644	$	(37,763	)	$	9,242

Net loss attributable to common stockholders, per:
Basic common share														$	0.25
Diluted common share														$	0.24
Weighted-average number of common shares outstanding, basic														37,358,334
Weighted-average number of common shares outstanding, diluted														37,828,573

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Nine Months Ended September 30, 2014

(dollars in thousands, except per share amounts)

(unaudited)



	Parent Company				Issuers			Combined Guarantor Subsidiaries				Combined Non- Guarantor Subsidiaries			Elimination			Consolidated
Revenues:
Rental income	$	—			$	—		$	97,384			$	14,359		$	—		$	111,743
Interest and other income	9				—			14,039				2,016			—			16,064
Total revenues	9				—			111,423				16,375			—			127,807
Expenses:
Depreciation and amortization	38				—			24,642				4,187			—			28,867
Interest	—				24,189			4,642				3,837			—			32,668
General and administrative	12,133				2			6,142				1,728			—			20,005
Total expenses	12,171				24,191			35,426				9,752			—			81,540

Other (expense) income:
Loss on extinguishment of debt	—				(21,846		)	(472		)		(136		)	—			(22,454		)
Other income (expense)	—				—			860				—			—			860

Total other (expense) income	—				(21,846		)	388				(136		)	—			(21,594		)

Income in subsidiary	36,864				82,901			4,368				—			(124,133		)	—

Net income	24,702				36,864			80,753				6,487			(124,133		)	24,673

Net loss attributable to noncontrolling interests	—				—			—				29			—			29

Net income attributable to Sabra Health Care REIT, Inc.	24,702				36,864			80,753				6,516			(124,133		)	24,702

Preferred dividends	(7,682		)		—			—				—			—			(7,682		)

Net income attributable to common stockholders	$	17,020		—	$	36,864		$	80,753		—	$	6,516		$	(124,133	)	$	17,020

Net income attributable to common stockholders, per:
Basic common share																		$	0.39
Diluted common share																		$	0.39
Weighted-average number of common shares outstanding, basic																		43,358,620
Weighted-average number of common shares outstanding, diluted																		43,840,550

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Nine Months Ended September 30, 2013

(dollars in thousands, except per share amounts)

(unaudited)



	Parent Company			Issuers			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Revenues:
Rental income	$	—		$	—		$	72,733		$	21,959	$	—		$	94,692
Interest and other income	82			—			2,449			—		—			2,531
Total revenues	82			—			75,182			21,959		—			97,223
Expenses:
Depreciation and amortization	38			—			18,983			5,705		—			24,726
Interest	—			21,585			2,797			5,502		—			29,884
General and administrative	10,671			4			453			68		—			11,196
Total expenses	10,709			21,589			22,233			11,275		—			65,806

Other (expense) income:
Loss on extinguishment of debt	—			(9,750		)	(351		)	—		—			(10,101		)
Other income (expense)	—			—			(600		)	—		—			(600		)

Total other (expense) income	—			(9,750		)	(951		)	—		—			(10,701		)

Income in subsidiary	31,343			62,682			2,892			—		(96,917		)	—

Net income	20,716			31,343			54,890			10,684		(96,917		)	20,716

Preferred dividends	(5,406		)	—			—			—		—			(5,406		)

Net income attributable to common stockholders	$	15,310		$	31,343		$	54,890		$	10,684	$	(96,917	)	$	15,310

Net income attributable to common stockholders, per:
Basic common share															$	0.41
Diluted common share															$	0.41
Weighted-average number of common shares outstanding, basic															37,334,120
Weighted-average number of common shares outstanding, diluted															37,777,458

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Nine Months Ended September 30, 2014

(in thousands)

(unaudited)



	Parent Company			Issuers			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries				Elimination			Consolidated
Net cash (used in) provided by operating activities	$	40,289		$	—		$	—		$	30,950			$	—		$	71,239
Cash flows from investing activities:
Acquisitions of real estate	—			—			(713,778		)	(8,101		)		—			(721,879		)
Origination of loans receivable	—			—			(59,256		)	—				—			(59,256		)
Preferred equity investment	—			—			(11,300		)	—				—			(11,300		)
Additions to real estate	—			—			(1,128		)	(23		)		—			(1,151		)
Repayment of loans receivable	—			—			287			—				—			287
Investment in subsidiaries	(12,288		)	(12,288		)	—			—				24,576			—
Intercompany financing	(182,248		)	(915,786		)	—			—				1,098,034			—
Net cash used in investing activities	(194,536		)	(928,074		)	(785,175		)	(8,124		)		1,122,610			(793,299		)
Cash flows from financing activities:
Proceeds from issuance of senior unsecured notes	—			350,000			—			—			—	—			350,000
Principal payments on senior unsecured notes	—			(211,250		)	—			—				—			(211,250		)
Proceeds from revolving credit facility	—			604,000			95,000			—				—			699,000
Payments on revolving credit facility	—			—			(220,500		)	—				—			(220,500		)
Proceeds from mortgage notes	—			—			—			57,703				—			57,703
Principal payments on mortgage notes	—			—			—			(88,419		)		—			(88,419		)
Payments of deferred financing costs	—			(9,212		)	(5,111		)	(1,151		)		—			(15,474		)
Issuance of common stock	229,825			—			—			—				—			229,825
Dividends paid on common and preferred stock	(57,654		)	—			—			—				—			(57,654		)
Contribution from Parent	—			12,288			—			12,288				(24,576		)	—
Intercompany financing	—			182,248			915,786			—				(1,098,034		)	—
Net cash provided by (used in) financing activities	172,171			928,074			785,175			(19,579		)		(1,122,610		)	743,231
Net increase in cash and cash equivalents	17,924			—			—			3,247				—			21,171
Cash and cash equivalents, beginning of period	3,551			—			—			757				—			4,308
Cash and cash equivalents, end of period	$	21,475		$	—		$	—		$	4,004			$	—		$	25,479

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Nine Months Ended September 30, 2013

(in thousands)

(unaudited)



	Parent Company			Issuers			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Elimination			Consolidated
Net cash provided by operating activities	$	36,878		$	—		$	—		$	12,333		$	—		$	49,211
Cash flows from investing activities:
Acquisitions of real estate	—			—			(6,175		)	—			—			(6,175		)
Origination of note receivable	—			—			(26,393		)	—			—			(26,393		)
Preferred equity investment	—			—			(6,624		)	—			—			(6,624		)
Additions to real estate	—			—			(388		)	—			—			(388		)
Net proceeds from the sale of real estate	—			—			—			2,208			—			2,208
Distribution from subsidiaries	3,345			3,345			—			—			(6,690		)	—
Intercompany financing	(52,041		)	(132,883		)	—			—			184,924			—
Net cash (used in) provided by investing activities	(48,696		)	(129,538		)	(39,580		)	2,208			178,234			(37,372		)
Cash flows from financing activities:
Proceeds from issuance of senior unsecured notes	—			200,000			—			—			—			200,000
Principal payments on senior unsecured notes	—			(113,750		)	—			—			—			(113,750		)
Payments on secured revolving credit facility	—			—			(92,500		)	—			—			(92,500		)
Principal payments on mortgage notes	—			—			—			(10,081		)	—			(10,081		)
Payments of deferred financing costs	—			(5,408		)	(3,011		)	(179		)	—			(8,598		)
Issuance of common stock	(2,950		)	—			—			—			—			(2,950		)
Issuance of preferred stock	138,257			—			—			—			—			138,257
Dividends paid	(42,677		)	—			—			—			—			(42,677		)
Distribution to Parent	—			(3,345		)	—			(3,345		)	6,690			—
Intercompany financing	—			52,041			135,091			(2,208		)	(184,924		)	—
Net cash provided by (used in) financing activities	92,630			129,538			39,580			(15,813		)	(178,234		)	67,701
Net increase (decrease) in cash and cash equivalents	80,812			—			—			(1,272		)	—			79,540
Cash and cash equivalents, beginning of period	15,075			—			—			2,026			—			17,101
Cash and cash equivalents, end of period	$	95,887		$	—		$	—		$	754		$	—		$	96,641