SUMMARIZED CONDENSED CONSOLIDATING INFORMATION

In connection with the offerings of the Senior Notes by the Issuers, 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.

The Guarantors were also subject to the guarantees described above while the 2018 Notes were outstanding, but such guarantees were released following the redemption of all of the remaining 2018 Notes in the six months ended June 30, 2014. As of June 30, 2015, no 2018 Notes were outstanding.

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

June 30, 2015

(in thousands)

(unaudited)



	Parent Company		Issuers		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries			Elimination			Consolidated
Assets
Real estate investments, net of accumulated depreciation	$	44	$	—	$	1,766,502	$	167,285		$	—		$	1,933,831
Loans receivable and other investments, net	—		—		278,507		—			—			278,507
Cash and cash equivalents	2,455		—		—		3,587			—			6,042
Restricted cash	—		—		160		6,933			—			7,093
Prepaid expenses, deferred financing costs and other assets, net	2,269		23,870		76,491		9,699			—			112,329
Intercompany	577,489		795,386		—		—			(1,372,875		)	—
Investment in subsidiaries	495,905		712,059		27,023		—			(1,234,987		)	—
Total assets	$	1,078,162	$	1,531,315	$	2,148,683	$	187,504		$	(2,607,862	)	$	2,337,802

Liabilities
Mortgage notes	$	—	$	—	$	—	$	142,252		$	—		$	142,252
Revolving credit facility	—		122,000		—		—			—			122,000
Term loans	—		200,000		72,846		—			—			272,846
Senior unsecured notes	—		699,323		—		—			—			699,323
Accounts payable and accrued liabilities	7,291		14,087		8,406		789			—			30,573
Intercompany	—		—		1,360,918		11,957			(1,372,875		)	—
Total liabilities	7,291		1,035,410		1,442,170		154,998			(1,372,875		)	1,266,994

Total Sabra Health Care REIT, Inc. stockholders' equity	1,070,871		495,905		706,513		32,569			(1,234,987		)	1,070,871
Noncontrolling interests	—		—		—		(63		)	—			(63		)
Total equity	1,070,871		495,905		706,513		32,506			(1,234,987		)	1,070,808
Total liabilities and equity	$	1,078,162	$	1,531,315	$	2,148,683	$	187,504		$	(2,607,862	)	$	2,337,802

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2014

(in thousands)



	Parent Company		Issuers		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries			Elimination			Consolidated
Assets
Real estate investments, net of accumulated depreciation	$	60	$	—	$	1,505,974	$	139,771		$	—		$	1,645,805
Loans receivable and other investments, net	—		—		251,583		—			—			251,583
Cash and cash equivalents	58,799		—		—		2,994			—			61,793
Restricted cash	—		—		160		6,864			—			7,024
Prepaid expenses, deferred financing costs and other assets, net	586		27,803		62,325		7,973			—			98,687
Intercompany	444,499		757,676		—		—			(1,202,175		)	—
Investment in subsidiaries	447,916		642,611		25,057		—			(1,115,584		)	—
Total assets	$	951,860	$	1,428,090	$	1,845,099	$	157,602		$	(2,317,759	)	$	2,064,892

Liabilities
Mortgage notes	$	—	$	—	$	—	$	124,022		$	—		$	124,022
Revolving credit facility	—		68,000		—		—			—			68,000
Term loan	—		200,000		—		—			—			200,000
Senior unsecured notes	—		699,272		—		—			—			699,272
Accounts payable and accrued liabilities	9,994		12,902		7,422		1,457			—			31,775
Intercompany	—		—		1,198,779		3,396			(1,202,175		)	—
Total liabilities	9,994		980,174		1,206,201		128,875			(1,202,175		)	1,123,069

Total Sabra Health Care REIT, Inc. stockholders' equity	941,866		447,916		638,898		28,770			(1,115,584		)	941,866
Noncontrolling interests	—		—		—		(43		)	—			(43		)
Total equity	941,866		447,916		638,898		28,727			(1,115,584		)	941,823
Total liabilities and equity	$	951,860	$	1,428,090	$	1,845,099	$	157,602		$	(2,317,759	)	$	2,064,892

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Three Months Ended June 30, 2015

(dollars in thousands, except per share amounts)

(unaudited)



	Parent Company			Issuers		Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Revenues:
Rental income	$	—		$	—	$	44,888		$	5,008	$	—		$	49,896
Interest and other income	—			74		5,925			691		—			6,690
Total revenues	—			74		50,813			5,699		—			56,586
Expenses:
Depreciation and amortization	14			—		12,981			1,502		—			14,497
Interest	—			12,665		136			1,251		—			14,052
General and administrative	3,589			2		5,714			557		—			9,862
Provision for doubtful accounts and write-offs	(136		)	—		3,108			—		—			2,972
Total expenses	3,467			12,667		21,939			3,310		—			41,383

Other income (expense):
Other (expense) income	—			—		(100		)	—		—			(100		)
Gain on sale of real estate	—			—		1,723			—		—			1,723

Total other income (expense)	—			—		1,623			—		—			1,623

Income in subsidiaries	20,302			32,895		—			—		(53,197		)	—

Net income	16,835			20,302		30,497			2,389		(53,197		)	16,826

Net loss attributable to noncontrolling interests	—			—		—			9		—			9

Net income attributable to Sabra Health Care REIT, Inc.	16,835			20,302		30,497			2,398		(53,197		)	16,835

Preferred stock dividends	(2,560		)	—		—			—		—			(2,560		)

Net income attributable to common stockholders	$	14,275		$	20,302	$	30,497		$	2,398	$	(53,197	)	$	14,275

Net income attributable to common stockholders, per:
Basic common share														$	0.24
Diluted common share														$	0.24
Weighted-average number of common shares outstanding, basic														59,323,799
Weighted-average number of common shares outstanding, diluted														59,543,781

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Three Months Ended June 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	$	—		$	—		$	29,795	$	7,690		$	—		$	37,485
Interest and other income	3			—			4,806		679			—			5,488
Total revenues	3			—			34,601		8,369			—			42,973
Expenses:
Depreciation and amortization	13			—			7,725		2,017			—			9,755
Interest	—			7,964			1,613		1,417			—			10,994
General and administrative	3,869			1			588		573			—			5,031
Provision for doubtful accounts and write-offs	—			—			2,895		—			—			2,895
Total expenses	3,882			7,965			12,821		4,007			—			28,675

Other (expense) income:
Loss on extinguishment of debt	—			(70		)	—		(92		)	—			(162		)
Other income (expense)	—			—			660		—			—			660

Total other (expense) income	—			(70		)	660		(92		)	—			498

Income in subsidiaries	18,680			26,715			1,078		—			(46,473		)	—

Net income	14,801			18,680			23,518		4,270			(46,473		)	14,796

Net loss attributable to noncontrolling interests	—			—			—		5			—			5

Net income attributable to Sabra Health Care REIT, Inc.	14,801			18,680			23,518		4,275			(46,473		)	14,801

Preferred dividends	(2,560		)	—			—		—			—			(2,560		)

Net income attributable to common stockholders	$	12,241		$	18,680		$	23,518	$	4,275		$	(46,473	)	$	12,241

Net loss attributable to common stockholders, per:
Basic common share															$	0.28
Diluted common share															$	0.28
Weighted-average number of common shares outstanding, basic															43,655,292
Weighted-average number of common shares outstanding, diluted															44,096,297

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Six Months Ended June 30, 2015

(dollars in thousands, except per share amounts)

(unaudited)



	Parent Company				Issuers		Combined Guarantor Subsidiaries				Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Revenues:
Rental income	$	—			$	—	$	89,489			$	9,912	$	—		$	99,401
Interest and other income	1				72		11,309				1,375		—			12,757
Total revenues	1				72		100,798				11,287		—			112,158
Expenses:
Depreciation and amortization	27				—		25,683				2,937		—			28,647
Interest	—				25,216		136				2,580		—			27,932
General and administrative	9,491				3		6,128				1,099		—			16,721
Provision for doubtful accounts and write-offs	(600		)		—		4,716				—		—			4,116
Total expenses	8,918				25,219		36,663				6,616		—			77,416

Other income (expense):
Other (expense) income	—				—		(200		)		—		—			(200		)
Gain on sale of real estate	—				—		1,723				—		—			1,723

Total other income (expense)	—				—		1,523				—		—			1,523

Income in subsidiaries	45,202				70,349		—				—		(115,551		)	—

Net income	36,285				45,202		65,658				4,671		(115,551		)	36,265

Net loss attributable to noncontrolling interests	—				—		—				20		—			20

Net income attributable to Sabra Health Care REIT, Inc.	36,285				45,202		65,658				4,691		(115,551		)	36,285

Preferred stock dividends	(5,121		)		—		—				—		—			(5,121		)

Net income attributable to common stockholders	$	31,164		—	$	45,202	$	65,658		—	$	4,691	$	(115,551	)	$	31,164

Net income attributable to common stockholders, per:
Basic common share																$	0.53
Diluted common share																$	0.52
Weighted-average number of common shares outstanding, basic																59,254,895
Weighted-average number of common shares outstanding, diluted																59,510,164

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Six Months Ended June 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	—		—		58,572	15,006		—		73,578
Interest and other income	7		—		8,898	1,340		—		10,245
Total revenues	7		—		67,470	16,346		—		83,823
Expenses:
Depreciation and amortization	25		—		15,146	3,934		—		19,105
Interest	—		15,754		3,488	2,886		—		22,128
General and administrative	8,559		2		934	1,290		—		10,785
Provision for doubtful accounts and write-offs	—		—		2,994	—		—		2,994
Total expenses	8,584		15,756		22,562	8,110		—		55,012

Other (expense) income:
Loss on extinguishment of debt	—		(21,689	)	—	(607	)	—		(22,296	)
Other income (expense)	—		—		960	—		—		960

Total other (expense) income	—		(21,689	)	960	(607	)	—		(21,336	)

Income in subsidiaries	16,075		53,520		2,419	—		(72,014	)	—

Net income	7,498		16,075		48,287	7,629		(72,014	)	7,475

Net loss attributable to noncontrolling interests	—		—		—	23		—		23

Net income attributable to Sabra Health Care REIT, Inc.	7,498		16,075		48,287	7,652		(72,014	)	7,498

Preferred dividends	(5,121	)	—		—	—		—		(5,121	)

Net income attributable to common stockholders	2,377		16,075		48,287	7,652		(72,014	)	2,377

Net income attributable to common stockholders, per:
Basic common share										0.06
Diluted common share										0.06
Weighted-average number of common shares outstanding, basic										41,324,795
Weighted-average number of common shares outstanding, diluted										41,791,470

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the Three Months Ended June 30, 2015

(dollars in thousands, except per share amounts)

(unaudited)



	Parent Company		Issuers			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Elimination			Consolidated

Net income	$	16,835	$	20,302		$	30,497		$	2,389		$	(53,197	)	$	16,826
Other comprehensive loss:
Foreign currency translation	—		(164		)	(326		)	(105		)	—			(595		)
Unrealized loss on cash flow hedge	—		(1,144		)	—			—			—			(1,144		)

Comprehensive income	16,835		18,994			30,171			2,284			(53,197		)	15,087

Comprehensive loss attributable to noncontrolling interest	—		—			—			9			—			9

Comprehensive income attributable to Sabra Health Care REIT, Inc.	$	16,835	$	18,994		$	30,171		$	2,293		$	(53,197	)	$	15,096

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the Six Months Ended June 30, 2015

(dollars in thousands, except per share amounts)

(unaudited)



	Parent Company		Issuers			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Elimination			Consolidated

Net income	$	36,285	$	45,202		$	65,658		$	4,671		$	(115,551	)	$	36,265
Other comprehensive loss:
Foreign currency translation	—		(164		)	(326		)	(105		)	—			(595		)
Unrealized loss on cash flow hedge	—		(2,689		)	—			—			—			(2,689		)

Comprehensive income	36,285		42,349			65,332			4,566			(115,551		)	32,981

Comprehensive loss attributable to noncontrolling interest	—		—			—			20			—			20

Comprehensive income attributable to Sabra Health Care REIT, Inc.	$	36,285	$	42,349		$	65,332		$	4,586		$	(115,551	)	$	33,001

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2015

(in thousands)

(unaudited)



	Parent Company			Issuers			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Elimination			Consolidated
Net cash provided by operating activities	$	37,007		$	—		$	—		$	14,300		$	—		$	51,307
Cash flows from investing activities:
Acquisitions of real estate	—			—			(290,604		)	(11,247		)	—			(301,851		)
Origination and fundings of loans receivable	—			—			(21,737		)	—			—			(21,737		)
Preferred equity investments	—			—			(5,131		)	—			—			(5,131		)
Additions to real estate	(11		)	—			(851		)	(171		)	—			(1,033		)
Release of contingent consideration held in escrow	—			—			5,240			—			—			5,240
Repayment of loans receivable	—			—			2,052			—			—			2,052
Investment in subsidiaries	(414		)	(414		)	—			—			828			—
Net proceeds from the sale of real estate	—			—			1,800			—			—			1,800
Distribution from subsidiaries	1,355			1,355			—			—			(2,710		)	—
Intercompany financing	(182,815		)	(236,689		)	—			—			419,504			—
Net cash used in investing activities	(181,885		)	(235,748		)	(309,231		)	(11,418		)	417,622			(320,660		)
Cash flows from financing activities:
Net repayments from revolving credit facility	—			54,000			—			—			—			54,000
Proceeds from term loan	—			—			73,242			—			—			73,242
Principal payments on mortgage notes	—			—			—			(1,340		)	—			(1,340		)
Payments of deferred financing costs	—			(126		)	(700		)	(8		)	—			(834		)
Issuance of common stock	140,062			—			—			—			—			140,062
Dividends paid on common and preferred stock	(51,343		)	—			—			—			—			(51,343		)
Contribution from parent	—			414			—			414			(828		)	—
Distribution to parent	—			(1,355		)	—			(1,355		)	2,710			—
Intercompany financing	—			182,815			236,689			—			(419,504		)	—
Net cash provided by (used in) financing activities	88,719			235,748			309,231			(2,289		)	(417,622		)	213,787
Net (decrease) increase in cash and cash equivalents	(56,159		)	—			—			593			—			(55,566		)
Effect of foreign currency translation on cash and cash equivalents	(185		)	—			—			—			—			(185		)
Cash and cash equivalents, beginning of period	58,799			—			—			2,994			—			61,793
Cash and cash equivalents, end of period	$	2,455		$	—		$	—		$	3,587		$	—		$	6,042

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Six Months Ended June 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	$	(1,746	)	$	—		$	—		$	30,667		$	—		$	28,921
Cash flows from investing activities:
Acquisitions of real estate	—			—			(108,650		)	(9,739		)	—			(118,389		)
Origination of note receivable	—			—			(38,373		)	—			—			(38,373		)
Preferred equity investment	—			—			(6,458		)	—			—			(6,458		)
Additions to real estate	—			—			(783		)	—			—			(783		)
Investment in subsidiaries	(12,122		)	(12,122		)	—			—			24,244			—
Intercompany financing	(160,248		)	(289,776		)	—			—			450,024			—
Net cash used in investing activities	(172,370		)	(301,898		)	(154,264		)	(9,739		)	474,268			(164,003		)
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		)
Net proceeds from revolving credit facility	—			—			(135,500		)	—			—			(135,500		)
Proceeds from mortgage notes	—			—			—			57,703			—			57,703
Principal payments on mortgage notes	—			—			—			(87,733		)	—			(87,733		)
Payments of deferred financing costs	—			(9,222		)	(12		)	(901		)	—			(10,135		)
Issuance of common stock	219,899			—			—			—			—			219,899
Dividends paid	(37,125		)	—			—			—			—			(37,125		)
Contribution from parent	—			12,122			—			12,122			(24,244		)	—
Intercompany financing	—			160,248			289,776			—			(450,024		)	—
Net cash provided by (used in) financing activities	182,774			301,898			154,264			(18,809		)	(474,268		)	145,859
Net increase in cash and cash equivalents	8,658			—			—			2,119			—			10,777
Cash and cash equivalents, beginning of period	3,551			—			—			757			—			4,308
Cash and cash equivalents, end of period	$	12,209		$	—		$	—		$	2,876		$	—		$	15,085