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 nine months ended September 30, 2014. As of September 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

September 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	$	30	$	—	$	1,811,010	$	163,633		$	—		$	1,974,673
Loans receivable and other investments, net	—		—		287,448		—			—			287,448
Cash and cash equivalents	26,909		—		211		4,353			—			31,473
Restricted cash	—		—		181		8,058			—			8,239
Prepaid expenses, deferred financing costs and other assets, net	2,348		27,369		84,459		11,045			(1,601		)	123,620
Intercompany	682,313		701,125		—		16,489			(1,399,927		)	—
Investment in subsidiaries	355,862		740,727		35,238		—			(1,131,827		)	—
Total assets	$	1,067,462	$	1,469,221	$	2,218,547	$	203,578		$	(2,533,355	)	$	2,425,453

Liabilities
Mortgage notes	$	—	$	—	$	—	$	168,608		$	—		$	168,608
Revolving credit facility	—		204,000		—		—			—			204,000
Term loans	—		200,000		67,113		—			—			267,113
Senior unsecured notes	—		699,349		—		—			—			699,349
Accounts payable and accrued liabilities	8,128		10,010		9,605		997			(1,601		)	27,139
Intercompany	—		—		1,399,927		—			(1,399,927		)	—
Total liabilities	8,128		1,113,359		1,476,645		169,605			(1,401,528		)	1,366,209

Total Sabra Health Care REIT, Inc. stockholders' equity	1,059,334		355,862		741,902		34,063			(1,131,827		)	1,059,334
Noncontrolling interests	—		—		—		(90		)	—			(90		)
Total equity	1,059,334		355,862		741,902		33,973			(1,131,827		)	1,059,244
Total liabilities and equity	$	1,067,462	$	1,469,221	$	2,218,547	$	203,578		$	(2,533,355	)	$	2,425,453

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 September 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	$	—		$	—	$	47,760		$	5,413	$	—		$	53,173
Interest and other income	—			129		6,211			550		(129		)	6,761
Total revenues	—			129		53,971			5,963		(129		)	59,934
Expenses:
Depreciation and amortization	14			—		14,674			1,618		—			16,306
Interest	—			13,211		676			1,418		(129		)	15,176
General and administrative	2,759			18		731			483		—			3,991
Provision for doubtful accounts and write-offs	113			—		2,376			—		—			2,489
Total expenses	2,886			13,229		18,457			3,519		(129		)	37,962

Other income (expense):
Other (expense) income	—			502		(602		)	—		—			(100		)
Net loss on sales of real estate	—			—		(3,838		)	—		—			(3,838		)

Total other income (expense)	—			502		(4,440		)	—		—			(3,938		)

Income in subsidiaries	20,947			33,545		2,282			—		(56,774		)	—

Net income	18,061			20,947		33,356			2,444		(56,774		)	18,034

Net loss attributable to noncontrolling interests	—			—		—			27		—			27

Net income attributable to Sabra Health Care REIT, Inc.	18,061			20,947		33,356			2,471		(56,774		)	18,061

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

Net income attributable to common stockholders	$	15,500		$	20,947	$	33,356		$	2,471	$	(56,774	)	$	15,500

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														65,160,290
Weighted-average number of common shares outstanding, diluted														65,398,175

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 expense	—			—		(100		)	—		—			(100		)

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

Income in subsidiaries	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 dividends	(2,561		)	—		—			—		—			(2,561		)

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

Net loss 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 Nine Months Ended September 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	$	—		$	—	$	137,249		$	15,325	$	—		$	152,574
Interest and other income	1			226		17,521			1,924		(154		)	19,518
Total revenues	1			226		154,770			17,249		(154		)	172,092
Expenses:
Depreciation and amortization	41			—		40,357			4,555		—			44,953
Interest	—			38,427		836			3,999		(154		)	43,108
General and administrative	12,251			21		6,858			1,582		—			20,712
Provision for doubtful accounts and write-offs	(488		)	—		7,093			—		—			6,605
Total expenses	11,804			38,448		55,144			10,136		(154		)	115,378

Other income (expense):
Other expense	—			1,671		(1,971		)	—		—			(300		)
Net loss on sales of real estate	—			—		(2,115		)	—		—			(2,115		)

Total other (expense) income	—			1,671		(4,086		)	—		—			(2,415		)

Income in subsidiaries	66,149			102,700		6,697			—		(175,546		)	—

Net income	54,346			66,149		102,237			7,113		(175,546		)	54,299

Net loss attributable to noncontrolling interests	—			—		—			47		—			47

Net income attributable to Sabra Health Care REIT, Inc.	54,346			66,149		102,237			7,160		(175,546		)	54,346

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

Net income attributable to common stockholders	$	46,664		$	66,149	$	102,237		$	7,160	$	(175,546	)	$	46,664

Net income attributable to common stockholders, per:
Basic common share														$	0.76
Diluted common share														$	0.76
Weighted-average number of common shares outstanding, basic														61,244,991
Weighted-average number of common shares outstanding, diluted														61,468,603

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			3,148			1,728			—			17,011
Provision for doubtful accounts and write-offs	—			—			2,994			—			—			2,994
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	—			—			860			—			—			860

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

Income in subsidiaries	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 COMPREHENSIVE INCOME

For the Three Months Ended September 30, 2015

(dollars in thousands, except per share amounts)

(unaudited)



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

Net income	$	18,061	$	20,947		$	33,356		$	2,444		$	(56,774	)	$	18,034
Other comprehensive loss:
Foreign currency translation	—		4,609			(2,765		)	(874		)	—			970
Unrealized loss on cash flow hedge	—		(1,781		)	—			—			—			(1,781		)

Comprehensive income	18,061		23,775			30,591			1,570			(56,774		)	17,223

Comprehensive loss attributable to noncontrolling interest	—		—			—			27			—			27

Comprehensive income attributable to Sabra Health Care REIT, Inc.	$	18,061	$	23,775		$	30,591		$	1,597		$	(56,774	)	$	17,250

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the Nine Months Ended September 30, 2015

(dollars in thousands, except per share amounts)

(unaudited)



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

Net income	$	54,346	$	66,149		$	102,237		$	7,113		$	(175,546	)	$	54,299
Other comprehensive loss:
Foreign currency translation	—		4,445			(3,091		)	(979		)	—			375
Unrealized loss on cash flow hedge	—		(4,470		)	—			—			—			(4,470		)

Comprehensive income	54,346		66,124			99,146			6,134			(175,546		)	50,204

Comprehensive loss attributable to noncontrolling interest	—		—			—			47			—			47

Comprehensive income attributable to Sabra Health Care REIT, Inc.	$	54,346	$	66,124		$	99,146		$	6,181		$	(175,546	)	$	50,251

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Nine Months Ended September 30, 2015

(in thousands) (unaudited)



	Parent Company			Issuers			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Elimination			Consolidated
Net cash provided by operating activities	$	74,256		$	—		$	22		$	4,837		$	—		$	79,115
Cash flows from investing activities:
Acquisitions of real estate	—			—			(375,324		)	(11,248		)	—			(386,572		)
Origination and fundings of loans receivable	—			—			(26,207		)	—			—			(26,207		)
Preferred equity investments	—			—			(9,281		)	—			—			(9,281		)
Additions to real estate	(11		)	—			(1,100		)	(485		)	—			(1,596		)
DIP Financing	—			—			(3,302		)	—			—			(3,302		)
Release of contingent consideration held in escrow	—			—			5,240			—			—			5,240
Repayment of loans receivable	—			—			3,285			—			—			3,285
Investment in subsidiaries	(414		)	(414		)	—			—			828			—
Net proceeds from the sale of real estate	—			—			15,752			—			—			15,752
Distribution from subsidiaries	1,355			1,355			—			—			(2,710		)	—
Intercompany financing	(165,871		)	(301,642		)	—			—			467,513			—
Net cash used in investing activities	(164,941		)	(300,701		)	(390,937		)	(11,733		)	465,631			(402,681		)
Cash flows from financing activities:
Net repayments from revolving credit facility	—			136,000			—			—			—			136,000
Proceeds from term loan	—			—			73,242			—			—			73,242
Proceeds from mortgage notes	—			—			—			28,735			—			28,735
Principal payments on mortgage notes	—			—			—			(2,184		)	—			(2,184		)
Payments of deferred financing costs	—			(229		)	(714		)	(371		)	—			(1,314		)
Issuance of common stock	139,617			—			—			—			—			139,617
Dividends paid on common and preferred stock	(80,619		)	—			—			—			—			(80,619		)
Contribution from parent	—			414			—			414			(828		)	—
Distribution to parent	—			(1,355		)	—			(1,355		)	2,710			—
Intercompany financing	—			165,871			318,618			(16,976		)	(467,513		)	—
Net cash provided by financing activities	58,998			300,701			391,146			8,263			(465,631		)	293,477
Net (decrease) increase in cash and cash equivalents	(31,687		)	—			231			1,367			—			(30,089		)
Effect of foreign currency translation on cash and cash equivalents	(203		)	—			(20		)	(8		)	—			(231		)
Cash and cash equivalents, beginning of period	58,799			—			—			2,994			—			61,793
Cash and cash equivalents, end of period	$	26,909		$	—		$	211		$	4,353		$	—		$	31,473

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 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 and fundings of loans receivable	—			—			(59,256		)	—			—			(59,256		)
Preferred equity investments	—			—			(11,300		)	—			—			(11,300		)
Additions to real estate	—			—			(1,128		)	(23		)	—			(1,151		)
Net proceeds from the sale of real estate	—			—			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		)
Net proceeds (repayments) from revolving credit facility	—			604,000			(125,500		)	—			—			478,500
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	(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