SUMMARIZED 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.

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, 2016

(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	$	150		$	—	$	1,828,629	$	181,160	$	—		$	2,009,939
Loans receivable and other investments, net	(410		)	—		96,446		—		—			96,036
Cash and cash equivalents	18,168			—		2,675		4,820		—			25,663
Restricted cash	—			—		57		8,945		—			9,002
Prepaid expenses, deferred financing costs and other assets, net	2,859			18,023		95,740		10,566		(1,909		)	125,279
Intercompany	368,281			686,376		—		—		(1,054,657		)	—
Investment in subsidiaries	640,238			908,253		12,364		—		(1,560,855		)	—
Total assets	$	1,029,286		$	1,612,652	$	2,035,911	$	205,491	$	(2,617,421	)	$	2,265,919
Liabilities
Mortgage notes, net	$	—		$	—	$	—	$	160,752	$	—		$	160,752
Revolving credit facility	—			26,000		—		—		—			26,000
Term loans, net	—			243,626		92,047		—		—			335,673
Senior unsecured notes, net	—			688,246		—		—		—			688,246
Accounts payable and accrued liabilities	13,712			14,542		11,333		1,961		(1,909		)	39,639
Intercompany	—			—		1,048,309		6,348		(1,054,657		)	—
Total liabilities	13,712			972,414		1,151,689		169,061		(1,056,566		)	1,250,310
Total Sabra Health Care REIT, Inc. stockholders’ equity:	1,015,574			640,238		884,222		36,395		(1,560,855		)	1,015,574
Noncontrolling interests	—			—		—		35		—			35
Total equity	1,015,574			640,238		884,222		36,430		(1,560,855		)	1,015,609
Total liabilities and equity	$	1,029,286		$	1,612,652	$	2,035,911	$	205,491	$	(2,617,421	)	$	2,265,919

CONSOLIDATING BALANCE SHEET

December 31, 2015

(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	$	48	$	—	$	1,874,394	$	165,174	$	—		$	2,039,616
Loans receivable and other investments, net	—		—		302,282		—		(2,105		)	300,177
Cash and cash equivalents	2,548		—		456		4,430		—			7,434
Restricted cash	—		—		1,788		8,025		—			9,813
Prepaid expenses, deferred financing costs and other assets, net	2,047		13,384		91,225		7,996		(2,855		)	111,797
Intercompany	489,763		918,209		—		—		(1,407,972		)	—
Investment in subsidiaries	568,841		792,065		8,855		—		(1,369,761		)	—
Total assets	$	1,063,247	$	1,723,658	$	2,279,000	$	185,625	$	(2,782,693	)	$	2,468,837
Liabilities
Mortgage notes	$	—	$	—	$	10,766	$	164,080	$	—		$	174,846
Revolving credit facility	—		255,000		—		—		—			255,000
Term loans, net	—		200,000		64,229		—		—			264,229
Senior unsecured notes, net	—		685,704		—		—		—			685,704
Accounts payable and accrued liabilities	9,477		14,113		11,392		2,056		(1,856		)	35,182
Intercompany	—		—		1,399,041		8,931		(1,407,972		)	—
Total liabilities	9,477		1,154,817		1,485,428		175,067		(1,409,828		)	1,414,961
Total Sabra Health Care REIT, Inc. stockholders' equity	1,053,770		568,841		793,572		10,452		(1,372,865		)	1,053,770
Noncontrolling interests	—		—		—		106		—			106
Total equity	1,053,770		568,841		793,572		10,558		(1,372,865		)	1,053,876
Total liabilities and equity	$	1,063,247	$	1,723,658	$	2,279,000	$	185,625	$	(2,782,693	)	$	2,468,837

CONSOLIDATING STATEMENT OF INCOME

For the Year Ended December 31, 2016

(in thousands, except share and per share amounts)



	Parent Company			Issuers			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Revenues:
Rental income	$	—		$	—		$	206,406		$	21,197	$	(2,328	)	$	225,275
Interest and other income	3			—			27,712			1		(253		)	27,463
Resident fees and services	—			—			—			7,788		—			7,788
Total revenues	3			—			234,118			28,986		(2,581		)	260,526
Expenses:
Depreciation and amortization	816			—			60,910			6,746		—			68,472
Interest	—			54,589			3,497			6,787		—			64,873
Operating expenses	—			—			—			8,066		(2,363		)	5,703
General and administrative	16,218			57			3,284			359		—			19,918
Provision for doubtful accounts and loan losses	(1,376		)	—			6,498			421		—			5,543
Impairment of real estate	—			—			29,811			—		—			29,811
Total expenses	15,658			54,646			104,000			22,379		(2,363		)	194,320

Other income (expense):
Loss on extinguishment of debt	—			(468		)	(88		)	—		—			(556		)
Other income (expense)	7,366			(196		)	3,507			—		—			10,677
Net (loss) gain on sales of real estate	—			—			(6,143		)	21		—			(6,122		)

Total other income (expense)	7,366			(664		)	(2,724		)	21		—			3,999

Income in subsidiary	78,783			134,093			6,840			—		(219,716		)	—

Net income	70,494			78,783			134,234			6,628		(219,934		)	70,205

Net loss attributable to noncontrolling interest	—			—			—			71		—			71

Net income attributable to Sabra Health Care REIT, Inc.	70,494			78,783			134,234			6,699		(219,934		)	70,276

Preferred stock dividends	(10,242		)	—			—			—		—			(10,242		)

Net income attributable to common stockholders	$	60,252		$	78,783		$	134,234		$	6,699	$	(219,934	)	$	60,034

Net income attributable to common stockholders, per:
Basic common share															$	0.92
Diluted common share															$	0.92
Weighted-average number of common shares outstanding, basic															65,284,251
Weighted-average number of common shares outstanding, diluted															65,520,672

CONSOLIDATING STATEMENT OF INCOME

For the Year Ended December 31, 2015

(in thousands, except share and per share amounts)



	Parent Company			Issuers		Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Revenues:
Rental income	$	—		$	—	$	190,582		$	20,470	$	(1,201	)	$	209,851
Interest and other income	2			334		25,472			1		(304		)	25,505
Resident fees and services	—			—		—			3,508		—			3,508
Total revenues	2			334		216,054			23,979		(1,505		)	238,864
Expenses:
Depreciation and amortization	47			—		57,141			5,891		—			63,079
Interest	—			52,208		1,536			5,735		(261		)	59,218
Operating expenses	—			—		—			3,789		(1,213		)	2,576
General and administrative	14,910			30		8,566			359		—			23,865
Provision for doubtful accounts and loan losses	1,291			—		11,551			—		—			12,842
Total expenses	16,248			52,238		78,794			15,774		(1,474		)	161,580

Other income (expense):
Other income (expense)	—			1,651		(101		)	710		—			2,260
Net loss on sales of real estate	—			—		(161		)	—		—			(161		)

Total other income (expense)	—			1,651		(262		)	710		—			2,099

Income in subsidiary	95,690			145,943		8,368			—		(250,001		)	—

Net income	79,444			95,690		145,366			8,915		(250,032		)	79,383

Net loss attributable to noncontrolling interest	—			—		—			30		—			30

Net income attributable to Sabra Health Care REIT, Inc.	79,444			95,690		145,366			8,945		(250,032		)	79,413

Preferred stock dividends	(10,242		)	—		—			—		—			(10,242		)

Net income attributable to common stockholders	$	69,202		$	95,690	$	145,366		$	8,945	$	(250,032	)	$	69,171

Net income attributable to common stockholders, per:
Basic common share														$	1.11
Diluted common share														$	1.11
Weighted-average number of common shares outstanding, basic														62,235,014
Weighted-average number of common shares outstanding, diluted														62,460,239

CONSOLIDATING STATEMENT OF INCOME

For the Year Ended December 31, 2014

(in thousands, except share and per share amounts)



	Parent Company			Issuers			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Elimination			Consolidated
Revenues:
Rental income	$	—		$	—		$	142,249		$	19,234		$	—		$	161,483
Interest and other income	9			—			19,357			1			—			19,367
Resident fee and services	—			—			—			2,668			—			2,668
Total revenues	9			—			161,606			21,903			—			183,518
Expenses:
Depreciation and amortization	52			—			37,645			5,635			—			43,332
Interest	—			37,129			4,642			5,187			—			46,958
Operating expenses	—			—			—			1,930			—			1,930
General and administrative	17,922			2			5,561			330			—			23,815
Provision for doubtful accounts and write-offs	600			—			2,994			—			—			3,594
Total expenses	18,574			37,131			50,842			13,082			—			119,629

Other income (expense):
Loss on extinguishment of debt	—			(21,846		)	(472		)	(136		)	—			(22,454		)
Other income	—			—			1,560			—			—			1,560
Gain on sale of real estate	—			—			3,914			—			—			3,914

Total other income (expense)	—			(21,846		)	5,002			(136		)	—			(16,980		)

Income in subsidiary	65,517			124,494			5,698			—			(195,709		)	—

Net income	46,952			65,517			121,464			8,685			(195,709		)	46,909

Net loss attributable to noncontrolling interest	—			—			—			43			—			43

Net income attributable to Sabra Health Care REIT, Inc.	46,952			65,517			121,464			8,728			(195,709		)	46,952

Preferred stock dividends	(10,242		)	—			—			—			—			(10,242		)

Net income attributable to common stockholders	$	36,710		$	65,517		$	121,464		$	8,728		$	(195,709	)	$	36,710

Net income attributable to common stockholders, per:
Basic common share																$	0.79
Diluted common share																$	0.78
Weighted-average number of common shares outstanding, basic																46,351,544
Weighted-average number of common shares outstanding, diluted																46,889,531

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the Year Ended December 31, 2016

(in thousands)



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

Net income	$	70,494	$	78,783		$	134,234	$	6,628	$	(219,934	)	$	70,205
Other comprehensive income (loss):
Foreign currency translation	—		(2,080		)	364		82		—			(1,634		)
Unrealized loss on cash flow hedge	—		7,169			—		—		—			7,169

Total other comprehensive loss	—		5,089			364		82		—			5,535

Comprehensive income	70,494		83,872			134,598		6,710		(219,934		)	75,740

Comprehensive loss attributable to noncontrolling interest	—		—			—		71		—			71

Comprehensive income attributable to Sabra Health Care REIT, Inc.	$	70,494	$	83,872		$	134,598	$	6,781	$	(219,934	)	$	75,811

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the Year Ended December 31, 2015

(in thousands)



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

Net income	$	79,444	$	95,690		$	145,366		$	8,915		$	(250,032	)	$	79,383
Other comprehensive income (loss):
Foreign currency translation	—		5,530			(5,495		)	(1,468		)	—			(1,433		)
Unrealized loss on cash flow hedge	—		(4,358		)	—			—			—			(4,358		)

Total other comprehensive income (loss)	—		1,172			(5,495		)	(1,468		)	—			(5,791		)

Comprehensive income	79,444		96,862			139,871			7,447			(250,032		)	73,592

Comprehensive loss attributable to noncontrolling interest	—		—			—			30			—			30

Comprehensive income attributable to Sabra Health Care REIT, Inc.	$	79,444	$	96,862		$	139,871		$	7,477		$	(250,032	)	$	73,622

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the Year Ended December 31, 2014

(in thousands)



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

Net income	$	46,952	$	65,517		$	121,464	$	8,685	$	(195,709	)	$	46,909
Other comprehensive income (loss):
Unrealized loss on cash flow hedge	—		(1,542		)	—		—		—			(1,542		)

Total other comprehensive loss	—		(1,542		)	—		—		—			(1,542		)

Comprehensive income	46,952		63,975			121,464		8,685		(195,709		)	45,367

Comprehensive loss attributable to noncontrolling interest	—		—			—		43		—			43

Comprehensive income attributable to Sabra Health Care REIT, Inc.	$	46,952	$	63,975		$	121,464	$	8,728	$	(195,709	)	$	45,410

CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2016

(in thousands)



	Parent Company			Issuers			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Elimination			Consolidated
Net cash provided by operating activities	$	153,577		$	—		$	12,074		$	11,088		$	—		$	176,739
Cash flows from investing activities:
Acquisitions of real estate	—			—			(133,797		)	(19,782		)	—			(153,579		)
Origination and fundings of loans receivable	—			—			(9,675		)	—			—			(9,675		)
Origination and fundings of preferred equity investments	—			—			(7,348		)	—			—			(7,348		)
Additions to real estate	(124		)	—			(502		)	(377		)	—			(1,003		)
Repayment of loan receivable	—			—			215,962			—			—			215,962
Investment in Subsidiary	(200		)	(200		)	—			—			400			—
Net proceeds from sale of real estate	—			—			97,407			599			—			98,006
Distribution from Subsidiary	6,404			6,404			—			—			(12,808		)	—
Intercompany financing	(23,484		)	165,842			—			—			(142,358		)	—
Net cash (used in) provided by investing activities	(17,404		)	172,046			162,047			(19,560		)	(154,766		)	142,363
Cash flows from financing activities:
Net repayment from revolving credit facility	—			(229,000		)	—			—			—			(229,000		)
Proceeds from term loan	—			45,000			24,360			—			—			69,360
Principal payments on mortgage notes	—			—			(10,766		)	(4,002		)	—			(14,768		)
Payments of deferred financing costs	—			(5,326		)	(611		)	—			—			(5,937		)
Issuance of common stock	(1,289		)	—			—			—			—			(1,289		)
Dividends paid on common and preferred stock	(119,264		)	—			—			—			—			(119,264		)
Contribution from Parent	—			200			—			200			(400		)	—
Distribution to Parent	—			(6,404		)	—			(6,404		)	12,808			—
Intercompany financing	—			23,484			(184,957		)	19,115			142,358			—
Net cash (used in) provided by financing activities	(120,553		)	(172,046		)	(171,974		)	8,909			154,766			(300,898		)
Net increase in cash and cash equivalents	15,620			—			2,147			437			—			18,204
Effect of foreign currency translation on cash and cash equivalents	—			—			72			(47		)	—			25
Cash and cash equivalents, beginning of period	2,548			—			456			4,430			—			7,434
Cash and cash equivalents, end of period	$	18,168		$	—		$	2,675		$	4,820		$	—		$	25,663

CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2015

(in thousands)



	Parent Company			Issuers			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Elimination			Consolidated
Net cash provided by operating activities	$	112,291		$	—		$	820		$	7,990		$	—		$	121,101
Cash flows from investing activities:
Acquisitions of real estate	—			—			(450,082		)	(11,248		)	—			(461,330		)
Origination and fundings of loans receivable	—			—			(49,687		)	—			—			(49,687		)
Preferred equity investments	—			—			(12,804		)	—			—			(12,804		)
Additions to real estate	(34		)	—			(1,286		)	(2,369		)	—			(3,689		)
Investment in Subsidiary	(414		)	(414		)	—			—			828			—
Distribution from Subsidiary	3,515			3,515			—			—			(7,030		)	—
Intercompany financing	(200,884		)	(387,652		)	—			—			588,536			—
Repayment of note receivable	—			—			5,803			—			—			5,803
Release of contingent consideration held in escrow	—			—			5,240			—			—			5,240
Net proceeds from sale of real estate	—			—			27,241			—			—			27,241
Net cash (used in) provided by investing activities	(197,817		)	(384,551		)	(475,575		)	(13,617		)	582,334			(489,226		)
Cash flows from financing activities:
Net proceeds from revolving credit facility	—			187,000			—			—			—			187,000
Proceeds from term loan	—			—			73,242			—			—			73,242
Proceeds from mortgage notes	—			—			—			28,735			—			28,735
Principal payments on mortgage notes	—			—			—			(3,132		)	—			(3,132		)
Payments of deferred financing costs	—			(232		)	(740		)	(480		)	—			(1,452		)
Contributions by noncontrolling interest	—			—			—			179			—			179
Issuance of common stock	139,403			—			—			—			—			139,403
Dividends paid on common and preferred stock	(109,897		)	—			—			—			—			(109,897		)
Contribution from Parent	—			414			—			414			(828		)	—
Distribution to Parent	—			(3,515		)	—			(3,515		)	7,030			—
Intercompany financing	—			200,884			402,745			(15,093		)	(588,536		)	—
Net cash provided by (in used) financing activities	29,506			384,551			475,247			7,108			(582,334		)	314,078
Net (decrease) increase in cash and cash equivalents	(56,020		)	—			492			1,481			—			(54,047		)
Effect of foreign currency translation on cash and cash equivalents	(231		)	—			(36		)	(45		)	—			(312		)
Cash and cash equivalents, beginning of period	58,799			—			—			2,994			—			61,793
Cash and cash equivalents, end of period	$	2,548		$	—		$	456		$	4,430		$	—		$	7,434

CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2014

(in thousands)



	Parent Company			Issuers			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Elimination			Consolidated
Net cash provided by operating activities	$	53,292		$	—		$	—		$	32,045		$	—		$	85,337
Cash flows from investing activities:
Acquisitions of real estate	—			—			(763,378		)	(8,101		)	—			(771,479		)
Origination and fundings of loans receivable	—			—			(66,397		)	—			—			(66,397		)
Preferred equity investments	—			—			(15,486		)	—			—			(15,486		)
Additions to real estate	(11		)	—			(1,437		)	(23		)	—			(1,471		)
Repayment of loans receivable	—			—			1,097			—			—			1,097
Net proceeds from the sale of real estate	—			—			27,264			—			—			27,264
Investment in Subsidiary	(12,147		)	(12,147		)	—			—			24,294			—
Distribution from Subsidiary	1,246			1,246			—			—			(2,492		)	—
Intercompany financing	(415,790		)	(958,970		)	—			—			1,374,760			—
Net cash (used in) provided by investing activities	(426,702		)	(969,871		)	(818,337		)	(8,124		)	1,396,562			(826,472		)
Cash flows from financing activities:
Proceeds from issuance of senior unsecured notes	—			499,250			—			—			—			499,250
Principal payments on senior unsecured notes	—			(211,250		)	—			—			—			(211,250		)
Net proceeds (repayment) from revolving credit facility	—			268,000			(135,500		)	—			—			132,500
Proceeds from mortgage notes	—			—			—			57,703			—			57,703
Principal payments on mortgage notes	—			—			—			(89,110		)	—			(89,110		)
Payments of deferred financing costs	—			(12,820		)	(5,133		)	(1,178		)	—			(19,131		)
Issuance of common stock	510,147			—			—			—			—			510,147
Dividends paid on common and preferred stock	(81,489		)	—			—			—			—			(81,489		)
Contribution from Parent	—			12,147			—			12,147			(24,294		)	—
Distribution to Parent	—			(1,246		)	—			(1,246		)	2,492			—
Intercompany financing	—			415,790			958,970			—			(1,374,760		)	—
Net cash provided by (used in) financing activities	428,658			969,871			818,337			(21,684		)	(1,396,562		)	798,620
Net increase in cash and cash equivalents	55,248			—			—			2,237			—			57,485
Cash and cash equivalents, beginning of period	3,551			—			—			757			—			4,308
Cash and cash equivalents, end of period	$	58,799		$	—		$	—		$	2,994		$	—		$	61,793