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.

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, 2017

(in thousands)

(unaudited)



	Parent Company			Issuers		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries			Elimination			Consolidated
Assets
Real estate investments, net of accumulated depreciation	$	151		$	—	$	1,848,316	$	147,444		$	—		$	1,995,911
Loans receivable and other investments, net	(172		)	—		94,380		—			—			94,208
Cash and cash equivalents	4,718			—		2,431		6,086			—			13,235
Restricted cash	—			—		67		9,346			—			9,413
Prepaid expenses, deferred financing costs and other assets, net	13,963			15,113		102,856		10,984			(1,723		)	141,193
Intercompany	292,398			674,928		—		—			(967,326		)	—
Investment in subsidiaries	698,329			987,422		13,814		—			(1,699,565		)	—
Total assets	$	1,009,387		$	1,677,463	$	2,061,864	$	173,860		$	(2,668,614	)	$	2,253,960

Liabilities
Mortgage notes, net	$	—		$	—	$	—	$	159,366		$	—		$	159,366
Revolving credit facility	—			32,000		—		—			—			32,000
Term loans, net	—			243,795		95,453		—			—			339,248
Senior unsecured notes, net	—			689,508		—		—			—			689,508
Accounts payable and accrued liabilities	12,691			13,831		8,626		3,698			(1,723		)	37,123
Intercompany	—			—		994,200		(26,874		)	(967,326		)	—
Total liabilities	12,691			979,134		1,098,279		136,190			(969,049		)	1,257,245

Total Sabra Health Care REIT, Inc. stockholders' equity	996,696			698,329		963,585		37,651			(1,699,565		)	996,696
Noncontrolling interests	—			—		—		19			—			19
Total equity	996,696			698,329		963,585		37,670			(1,699,565		)	996,715
Total liabilities and equity	$	1,009,387		$	1,677,463	$	2,061,864	$	173,860		$	(2,668,614	)	$	2,253,960

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2016

(in thousands)

(unaudited)



	Parent Company			Issuers		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries		Elimination			Consolidated
Assets
Real estate investments, net of accumulated depreciation	$	150		$	—	$	1,860,850	$	148,939	$	—		$	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		96,301		10,005		(1,909		)	125,279
Intercompany	368,281			687,493		—		25,125		(1,080,899		)	—
Investment in subsidiaries	640,238			907,136		12,364		—		(1,559,738		)	—
Total assets	$	1,029,286		$	1,612,652	$	2,068,693	$	197,834	$	(2,642,546	)	$	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		11,606		1,688		(1,909		)	39,639
Intercompany	—			—		1,080,899		—		(1,080,899		)	—
Total liabilities	13,712			972,414		1,184,552		162,440		(1,082,808		)	1,250,310

Total Sabra Health Care REIT, Inc. stockholders' equity	1,015,574			640,238		884,141		35,359		(1,559,738		)	1,015,574
Noncontrolling interests	—			—		—		35		—			35
Total equity	1,015,574			640,238		884,141		35,394		(1,559,738		)	1,015,609
Total liabilities and equity	$	1,029,286		$	1,612,652	$	2,068,693	$	197,834	$	(2,642,546	)	$	2,265,919

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Three Months Ended June 30, 2017

(dollars in thousands, except per share amounts)

(unaudited)



	Parent Company			Issuers		Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination			Consolidated
Revenues:
Rental income	$	—		$	—	$	52,442		$	4,656		$	(1,194	)	$	55,904
Interest and other income	6			—		2,039			—			(18		)	2,027
Resident fees and services	—			—		—			6,805			—			6,805
Total revenues	6			—		54,481			11,461			(1,212		)	64,736
Expenses:
Depreciation and amortization	216			—		15,425			1,579			—			17,220
Interest	—			13,516		715			1,631			—			15,862
Operating expenses	—			—		—			5,619			(1,212		)	4,407
General and administrative	9,853			17		1,222			57			—			11,149
Provision for doubtful accounts and loan losses	227			—		308			—			—			535
Total expenses	10,296			13,533		17,670			8,886			(1,212		)	49,173

Other income (expense):
Other income	916			703		(665		)	(13		)	—			941
Net gain on sales of real estate	—			—		4,026			6			—			4,032

Total other income (expense)	916			703		3,361			(7		)	—			4,973

Income in subsidiary	29,894			42,724		1,785			—			(74,403		)	—

Net income	20,520			29,894		41,957			2,568			(74,403		)	20,536

Net income attributable to noncontrolling interests	—			—		—			(16		)	—			(16		)

Net income attributable to Sabra Health Care REIT, Inc.	20,520			29,894		41,957			2,552			(74,403		)	20,520

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

Net income attributable to common stockholders	$	17,960		$	29,894	$	41,957		$	2,552		$	(74,403	)	$	17,960

Net loss attributable to common stockholders, per:
Basic common share															$	0.27
Diluted common share															$	0.27
Weighted-average number of common shares outstanding, basic															65,438,739
Weighted-average number of common shares outstanding, diluted															65,670,853

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Three Months Ended June 30, 2016

(dollars in thousands, except per share amounts)

(unaudited)



	Parent Company			Issuers		Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination			Consolidated
Revenues:
Rental income	$	—		$	—	$	50,674		$	5,214		$	(591	)	$	55,297
Interest and other income	1			119		17,004			65			(196		)	16,993
Resident fees and services	—			—		—			1,959			—			1,959
Total revenues	1			119		67,678			7,238			(787		)	74,249
Expenses:
Depreciation and amortization	201			—		14,620			1,584			—			16,405
Interest	—			13,720		1,114			1,712			(119		)	16,427
Operating expenses	—			—		—			2,043			(603		)	1,440
General and administrative	3,713			12		849			62			—			4,636
(Recovery of) provision for doubtful accounts and loan losses	(888		)	—		1,111			—			—			223
Total expenses	3,026			13,732		17,694			5,401			(722		)	39,131

Other income (expense):
Other income (expense)	2,098			16		309			(23		)	—			2,400
Net loss on sales of real estate	—			—		(52		)	—			—			(52		)

Total other income (expense)	2,098			16		257			(23		)	—			2,348

Income in subsidiary	38,467			52,064		1,710			—			(92,241		)	—

Net income	37,540			38,467		51,951			1,814			(92,306		)	37,466

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

Net income attributable to Sabra Health Care REIT, Inc.	37,540			38,467		51,951			1,823			(92,306		)	37,475

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

Net income attributable to common stockholders	$	34,980		$	38,467	$	51,951		$	1,823		$	(92,306	)	$	34,915

Net loss attributable to common stockholders, per:
Basic common share															$	0.53
Diluted common share															$	0.53
Weighted-average number of common shares outstanding, basic															65,303,057
Weighted-average number of common shares outstanding, diluted															65,503,383

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Six Months Ended June 30, 2017

(dollars in thousands, except per share amounts)

(unaudited)



	Parent Company			Issuers		Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries		Elimination			Consolidated
Revenues:
Rental income	$	—		$	—	$	105,481		$	9,625	$	(1,978	)	$	113,128
Interest and other income	13			—		3,977			—		(18		)	3,972
Resident fees and services	—			—		—			10,286		—			10,286
Total revenues	13			—		109,458			19,911		(1,996		)	127,386
Expenses:
Depreciation and amortization	432			—		32,381			3,544		—			36,357
Interest	—			26,924		1,445			3,281		—			31,650
Operating expenses	—			—		—			8,823		(1,996		)	6,827
General and administrative	15,770			32		2,019			201		—			18,022
Provision for doubtful accounts and loan losses	82			—		2,223			—		—			2,305
Total expenses	16,284			26,956		38,068			15,849		(1,996		)	95,161

Other income:
Other income	2,283			737		50			—		—			3,070
Net gain on sale of real estate	—			—		4,026			6		—			4,032

Total other income	2,283			737		4,076			6		—			7,102

Income in subsidiary	53,331			79,550		3,564			—		(136,445		)	—

Net income	39,343			53,331		79,030			4,068		(136,445		)	39,327

Net loss attributable to noncontrolling interests	—			—		—			16		—			16

Net income attributable to Sabra Health Care REIT, Inc.	39,343			53,331		79,030			4,084		(136,445		)	39,343

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

Net income attributable to common stockholders	$	34,222		$	53,331	$	79,030	—	$	4,084	$	(136,445	)	$	34,222

Net loss attributable to common stockholders, per:
Basic common share														$	0.52
Diluted common share														$	0.52
Weighted-average number of common shares outstanding, basic														65,396,146
Weighted-average number of common shares outstanding, diluted														65,694,019

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Six Months Ended June 30, 2016

(dollars in thousands, except per share amounts)

(unaudited)



	Parent Company			Issuers			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination			Consolidated
Revenues:
Rental income	$	—		$	—		$	101,424		$	10,347		$	(1,162	)	$	110,609
Interest and other income	2			238			22,335			127			(377		)	22,325
Resident fees and services	—			—			—			3,874			—			3,874
Total revenues	2			238			123,759			14,348			(1,539		)	136,808
Expenses:
Depreciation and amortization	384			—			30,634			3,153			—			34,171
Interest	—			28,023			2,132			3,428			(238		)	33,345
Operating expenses	—			—			—			4,025			(1,173		)	2,852
General and administrative	8,187			22			1,029			112			—			9,350
(Recovery of) provision for doubtful accounts and loan losses	(655		)	—			3,401			—			—			2,746
Impairment of real estate	—			—			29,811			—			—			29,811
Total expenses	7,916			28,045			67,007			10,718			(1,411		)	112,275

Other income (expense):
Loss on extinguishment of debt	—			(468		)	(88		)	—			—			(556		)
Other income (expense)	2,098			516			(141		)	(73		)	—			2,400
Net loss on sales of real estate	—			—			(4,654		)	—			—			(4,654		)

Total other income (expense)	2,098			48			(4,883		)	(73		)	—			(2,810		)

Income in subsidiary	27,708			55,467			3,370			—			(86,545		)	—

Net income	21,892			27,708			55,239			3,557			(86,673		)	21,723

Net loss attributable to noncontrolling interests	—			—			—			41			—			41

Net income attributable to Sabra Health Care REIT, Inc.	21,892			27,708			55,239			3,598			(86,673		)	21,764

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

Net income attributable to common stockholders	$	16,771		$	27,708		$	55,239		$	3,598		$	(86,673	)	$	16,643

Net loss attributable to common stockholders, per:
Basic common share																$	0.25
Diluted common share																$	0.25
Weighted-average number of common shares outstanding, basic																65,274,845
Weighted-average number of common shares outstanding, diluted																65,454,337

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the Three Months Ended June 30, 2017

(dollars in thousands)

(unaudited)



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

Net income	$	20,520	$	29,894		$	41,957		$	2,568		$	(74,403	)	$	20,536
Other comprehensive (loss) income
Unrealized gain (loss), net of tax:
Foreign currency translation (loss) income	—		(415		)	833			280			—			698
Unrealized gain (loss) on cash flow hedge ⁽¹⁾	—		285			(188		)	—			—			97

Total other comprehensive (loss) income	—		(130		)	645			280			—			795

Comprehensive income	20,520		29,764			42,602			2,848			(74,403		)	21,331

Comprehensive income attributable to noncontrolling interest	—		—			—			(16		)	—			(16		)

Comprehensive income attributable to Sabra Health Care REIT, Inc.	$	20,520	$	29,764		$	42,602		$	2,832		$	(74,403	)	$	21,315

⁽¹⁾ Amounts are net of provision for income taxes of $0.2 million for the three months ended June 30, 2017.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the Three Months Ended June 30, 2016

(dollars in thousands)

(unaudited)



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

Net income	$	37,540	$	38,467		$	51,951	$	1,814	$	(92,306	)	$	37,466
Other comprehensive income:
Foreign currency translation	—		287			29		8		—			324
Unrealized loss on cash flow hedge	—		(206		)	—		—		—			(206		)

Total other comprehensive income	—		81			29		8		—			118

Comprehensive income	37,540		38,548			51,980		1,822		(92,306		)	37,584

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

Comprehensive income attributable to Sabra Health Care REIT, Inc.	$	37,540	$	38,548		$	51,980	$	1,831	$	(92,306	)	$	37,593

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the Six Months Ended June 30, 2017

(dollars in thousands)

(unaudited)



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

Net income	$	39,343	$	53,331		$	79,030		$	4,068	$	(136,445	)	$	39,327
Other comprehensive (loss) income
Unrealized (loss) gain, net of tax:
Foreign currency translation (loss) income	—		(1,367		)	1,131			376		—			140
Unrealized gain (loss) on cash flow hedge ⁽¹⁾	—		1,013			(188		)	—		—			825

Total other comprehensive (loss) income	—		(354		)	943			376		—			965

Comprehensive income	39,343		52,977			79,973			4,444		(136,445		)	40,292

Comprehensive loss attributable to noncontrolling interest	—		—			—			16		—			16

Comprehensive income attributable to Sabra Health Care REIT, Inc.	$	39,343	$	52,977		$	79,973		$	4,460	$	(136,445	)	$	40,308

⁽¹⁾ Amounts are net of provision for income taxes of $0.2 million for the six months ended June 30, 2017.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the Six Months Ended June 30, 2016

(dollars in thousands)

(unaudited)



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

Net income	$	21,892	$	27,708		$	55,239	$	3,557	$	(86,673	)	$	21,723
Other comprehensive (loss) income:
Foreign currency translation (loss) income	—		(2,357		)	1,663		445		—			(249		)
Unrealized loss on cash flow hedge	—		(1,698		)	—		—		—			(1,698		)

Total other comprehensive (loss) income	—		(4,055		)	1,663		445		—			(1,947		)

Comprehensive income	21,892		23,653			56,902		4,002		(86,673		)	19,776

Comprehensive loss attributable to noncontrolling interest	—		—			—		41		—			41

Comprehensive income attributable to Sabra Health Care REIT, Inc.	$	21,892	$	23,653		$	56,902	$	4,043	$	(86,673	)	$	19,817

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2017

(in thousands)

(unaudited)



	Parent Company			Issuers			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination			Consolidated
Net cash provided by (used in) operating activities	$	49,670		$	—		$	(1,703	)	$	5,904		$	—		$	53,871
Cash flows from investing activities:
Acquisition of real estate	—			—			(14,456		)	—			—			(14,456		)
Origination and fundings of loans receivable	—			—			(927		)	—			—			(927		)
Origination and fundings of preferred equity investments	—			—			(76		)	—			—			(76		)
Additions to real estate	(12		)	—			(1,106		)	(176		)	—			(1,294		)
Repayment of loans receivable	—			—			1,547			—			—			1,547
Repayments of preferred equity investments	—			—			2,766			—			—			2,766
Investment in subsidiaries	2,474			2,474			—			—			(4,948		)	—
Net proceeds from the sales of real estate	—			—			6,099			—			—			6,099
Intercompany financing	(1,667		)	(7,543		)	—			—			9,210			—
Net cash provided by (used in) investing activities	795			(5,069		)	(6,153		)	(176		)	4,262			(6,341		)
Cash flows from financing activities:
Net repayments from revolving credit facility	—			6,000			—			—			—			6,000
Principal payments on mortgage notes	—			—			—			(2,049		)	—			(2,049		)
Payments of deferred financing costs	—			(124		)	—			—			—			(124		)
Issuance of common stock, net	(3,224		)	—			—			—			—			(3,224		)
Dividends paid on common and preferred stock	(60,691		)	—			—			—			—			(60,691		)
Distribution to parent	—			(2,474		)	—			(2,474		)	4,948			—
Intercompany financing	—			1,667			7,543			—			(9,210		)	—
Net cash (used in) provided by financing activities	(63,915		)	5,069			7,543			(4,523		)	(4,262		)	(60,088		)
Net (decrease) increase in cash and cash equivalents	(13,450		)	—			(313		)	1,205			—			(12,558		)
Effect of foreign currency translation on cash and cash equivalents	—			—			69			61			—			130
Cash and cash equivalents, beginning of period	18,168			—			2,675			4,820			—			25,663
Cash and cash equivalents, end of period	$	4,718		$	—		$	2,431		$	6,086		$	—		$	13,235

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2016

(in thousands)

(unaudited)



	Parent Company			Issuers			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination			Consolidated
Net cash provided by operating activities	$	87,170		$	—		$	3,177		$	4,147		$	—		$	94,494
Cash flows from investing activities:
Origination and fundings of loans receivable	—			—			(6,283		)	—			—			(6,283		)
Origination and fundings of preferred equity investments	—			—			(6,172		)	—			—			(6,172		)
Additions to real estate	(120		)	—			(400		)	(354		)	—			(874		)
Repayment of loans receivable	—			—			193,893			—			—			193,893
Investment in subsidiaries	(200		)	(200		)	—			—			400			—
Net proceeds from the sale of real estate	—			—			75,456			—			—			75,456
Distribution from subsidiaries	2,025			2,025			—			—			(4,050		)	—
Intercompany financing	64,758			280,078			—			—			(344,836		)	—
Net cash provided by (used in) investing activities	66,463			281,903			256,494			(354		)	(348,486		)	256,020
Cash flows from financing activities:
Net repayments from revolving credit facility	—			(255,000		)	—			—			—			(255,000		)
Proceeds from term loan	—			45,000			24,360			—			—			69,360
Principal payments on mortgage notes	—			—			(77		)	(1,983		)	—			(2,060		)
Payments of deferred financing costs	—			(5,320		)	(611		)	—			—			(5,931		)
Issuance of common stock, net	(1,289		)	—			—			—			—			(1,289		)
Dividends paid on common and preferred stock	(59,288		)	—			—			—			—			(59,288		)
Contribution from parent	—			200			—			200			(400		)	—
Distribution to parent	—			(2,025		)	—			(2,025		)	4,050			—
Intercompany financing	—			(64,758		)	(280,078		)	—			344,836			—
Net cash used in financing activities	(60,577		)	(281,903		)	(256,406		)	(3,808		)	348,486			(254,208		)
Net increase (decrease) in cash and cash equivalents	93,056			—			3,265			(15		)	—			96,306
Effect of foreign currency translation on cash and cash equivalents	—			—			70			58			—			128
Cash and cash equivalents, beginning of period	2,548			—			456			4,430			—			7,434
Cash and cash equivalents, end of period	$	95,604		$	—		$	3,791		$	4,473		$	—		$	103,868