Good day ladies and gentlemen, and welcome the Sabra Health Care REIT Inc. Third Quarter 2013 Earnings Conference Call. Today’s call is being recorded. At this time I would like to turn the call over to Talya Nevo, our Co-Chief Investment Officer. Please go ahead Ms. Nevo.

Thank you very much. Before we begin, I want to remind you that we will be making forward-looking statements in our comments and in response to your questions concerning our business strategies, expectations regarding our acquisitions and investment plans, and our expectations regarding our future results of operations. These forward-looking statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially, including the risks listed in our Form 10-K for the year ended December 31, 2012 that is on file with the SEC, as well as in our earnings press release at 99.1 to the Form 8-K we furnished to the SEC yesterday. We undertake no obligation to update our forward-looking statements to reflect subsequent events or circumstances and you should not assume later in the quarter that the comments we make today are still valid. In addition, references will be made during this call to non-GAAP financial results. Investors are encouraged to review these non-GAAP financial measures, as well as the explanation and reconciliations of these measures to the comparable GAAP results included at the end of our earnings press release and the supplemental information materials included as Exhibits 99.1 and 99.2 respectively to the Form 8-K we furnished to the SEC yesterday. These materials can also be accessed in the Investor Relations section of our website at www.sabrahealth.com. And with that, let me turn the call over to Rick Matros, Chairman and CEO of Sabra Health Care REIT. Rick?

Thanks, Talya. And welcome everybody to our call this morning. I will jump right into the Forest Park deal. This deal was attractive to us on a number of levels. These are purpose built high end acute hospitals that are state of the art. They are built to conform with the trends that we see on the ground with healthcare reform, with the focus really being primarily on outpatient surgery, with their internship unit [indiscernible]. So as a result we see in the Dallas and Frisco hospitals, 50% and 60% of their revenues coming from outpatient. We see their average length of stay in their inpatient units at 1.8 days which is less than half of the industry average. So we think that bodes really will help the future. The physician billing hospitals, so all private pay. We obviously like that about it. As we have seen in countries that already have socialized medicine, private pay continues to exist and flourish, as long as those two [indiscernible] and they certainly are. The design of the hospital is hospitality hotel oriented. You really feel like you are in a five star hotel when you are in the room in these the hospitals, big destinations points, they contain banks and shops. They are cafeterias that are chef run, and in some cases open to the public, [indiscernible] was very interesting and unusual [indiscernible] by all parties. The fixed bill [ph] physicians had material capital development as obviously it’s a development group. On a go forward basis in the operating companies, the development company stays in, all the docs participate in the profit of the company and so everybody’s interest is outlined with Sabra’s. The pricing of the deal reflects really all of the comments that I just made. We realized that 8.75…

Thanks Rick and thanks everybody for join the call today. I want to start today with an overview of our results for the third quarter of 2013 and then spend some time on the financial impact of the Forest Park investments, how we’re thinking about our capital sources to fund acquisitions moving forward. For the three and nine month periods ended September 30, 2013, we recorded revenues of $32.9 million and $97.4 million respectively, compared to $26 million and $74.9 million for the same periods in 2012, increases of 26.5% and 29.8% respectively. AFFO for the third three and nine month periods ended September 30, 2013 was $17.5 million and $40 million or $0.46 and $1.06 per share respectively. Normalized FFO for the same periods with excludes nonrecurring refinancing costs was $17.9 million and $50.9 million or $0.47 and $1.35 per share respectively, increases of 35.5% and 31.8% over the same periods in the prior year. AFFO for the three and nine month periods ended September 30, 2013 was $16.3 million and $38.5 million or $0.43 and $1.01 per share respectively. AFFO for the quarter increased 9.4% over the same period in 2012. Normalized AFFO for the nine month period ended September 30, 2013, which excludes nonrecurring refinancing costs as well was $48.5 million and $1.27 per share, an increase of 8.9% over the same period in the prior year. For the second quarter of 2013, we had net income attributable to common stock holders of $9.2 million or $0.24 per diluted common share compared to $5.2 million for the third quarter of 2.12, which was $0.41 per diluted common share. Our net income attributable to common stock holders was $15.3 million or $0.41 per common share for the nine month period ended September 30, 2013. This compares to $15.6…

Thanks Harold, why don't we go to Q&A now.

(Operator Instructions). We'll hear first from Michael Bilerman from Citi.

This is Archana for Michael Bilerman from Citi. Could you shed some light on the coverage ratios for the vis-à-vis acquired Forest Park cost, and the mortgage loan and also moreover looking at future acquisition opportunities with the Neal Richards Group, would they be more concentrated in Texas as well? How do you balance out that geographic concentration going forward? Thank you.

I will take the second part of the question and give the first part of the question over the Harold. In terms of their expansion activities they have additional projects in Texas but they also have now identified projects in two other states.

As it relates to coverages, so first the hospital that we acquired out right, their coverage is on the same basis as we issue coverages at portfolio which I am not going to [indiscernible] will be around two point times, for the trailing 3.8 times for the trailing 12. And then in Dallas, because that's a mortgage loan I think the relevant factor there is to think about what our coverages -- fixed charge coverage if you will for that entity, that's about 1.6 times. Keep in mind though that this is a special purpose entity to really they are collecting rents from their tenant and they are paying interests on our loans. So we wouldn't expect really any debt coverage.

Our next question is from Rob Mains from Stifel.

One question on the Genesis coverage. I paid the heads up on what we’ll likely see in third quarter. What happened in the second part of the fixed coverage could have moved up as much as it did, just because as I know it was not really a bang up quarter for the industry.

Cost controls were really solid. The facility management was really kind of peaking at least through certain parts of the portfolio as it relates to all the changes. Those were really the main drivers, and the seasonality really just started hitting them in the last month of the quarter. And then, but the initial synergies kicking in obviously helped quite a bit as well, but again those are the synergies that didn't really effect operations, although it gets covered in our fixed coverage definition, because it was mostly back office and that's why I pointed out that and I’ll get a little bit more specific and you will appreciate it Rob. In terms of the second phase of execution of synergies, when I talked about the impact, some [indiscernible] conformed to the Genesis clinical protocols, completely different food programs, brand new management system and some different therapy management. Any one of those would have a material impact on an operator. They are rolling it all out. And I think the decision there was, let's get through it, let's take the bump kind of all at once, so that we can recover. And the early returns, first three months is you’ve already seen some nice recovery. So I think everything is going is planned. I just wanted to give everybody a heads up to have more realistic expectation, but not to be concerned over the long run.

And then you said the pipeline predominantly senior housing, where do you think for cap rates, because as you know, some of your larger peers are noting that despite what's happened in the capital cost environment, cap rates, at least some of the big portfolio seem to be pretty sticky.

Rob it's Talya. I think that we concur with that last comment. That observation syncs up with what we're seeing on the larger portfolios where there is sufficient capital interested in the sector, and even pension funds and such institutional capital. But it definitely is driving fortune cap rates to remain pretty sticky on the larger transactions. On the smaller transactions, it’s sort of $100 million in smaller that we're typically focused on where we're not seeing any downward pressure on cap rates and we're basically seeing them sticky. But I would say on seniors housing its 7.5% lease, going in lease rate plus minus is about what we're seeing. And we're still looking at deals slightly sub eight maybe.

And going back to some of Harold's comments about capital, the thing about capital going forward, that leaves you enough room to have an initial spread. You are pretty comfortable with that?

Yes, absolutely. When you are going to think about our cost of capital moving forward and thinking about doing acquisitions on a kind of a balanced debt to equity balance basis 50-50, we still get a lot of accretion, because when you think about, one thing the people, some of us don’t think about is when you calculate your cost of equity and you factor in the growth rate for your dividend, your growth rate for your AFFO over time, you also have to factor in a growth in rents through the escalators. So you can't really compare a cost of capital, thinking it might be around 1% to initial cash yield because the cost of capital inclusive growth over time where the initial cash yield is point in time and we'll see growth. So you take the Forest Park transaction as an example, the cash yields 8.75 at first go, but the GAAP yield which includes 3% escalators is 11%. So when you start comparing 11% yield to 9% to cost of capital, you still get really nice growth. And on an actual accretion basis it’s very significant.

Okay, and then just one more and then I’ll let somebody else ask a question. Just kind of follow-up on the senior housing opportunities. Obviously where it not for this Forest Park transaction, things would be, you would have gone through kind of a long quiet period and Rick you said things sort of picked up after Labor Day. Just when you say picked up, are you saying, is it that there is more people interested in transactions or is it that maybe reality is setting in because I’ve heard a lot of and your peers complain that a lot of sellers still have kind of visions of super plums dancing and [indiscernible] have in terms of what they can get given where they’ve seen some other transactions get done?

I think we have a little bit different point of view that at this point is anybody’s best guess. I think for the first eight-nine months of the year taxes went up, guys sort of stepped back and said do we really have to monetize now? The year goes by and maybe it just gets to the point where we really do need to monetize now when you start thinking about year ends, maybe you want to get something done before year end, or only better off from a capital gains perspective, and so the first quarter, which is why we’re going to be flexible with our potential new tenants on the deal that we’re currently working on. So I am not really sure. It felt like nothing was changing anyway. The amounts will still sell but based on Talya’s comments also, we’re not seeing pricing at the $100 million level that says these guys have sugar plum berries dancing in their heads. And when I say that deal volume picked up after Labor Day, I’m talking about going to getting a couple of calls over several weeks to getting calls every single day. It was like someone just turned on the spigot. So again, it’s anyone’s best guess Rob, but we’ll take it.

(Operator Instructions). We’ll hear next from Michael Carroll with RBC Capital Markets.

Hey Rick can you give us a little color on how the hospital campuses are laid out; in particular how many medical office building surround the two established hospitals and is there similar development around the Fort Worth project?

The medical office buildings are part of the campus. There is no other medical office buildings that are closely within the vicinity of any of the projects. The medical office buildings are owned by another publicly held RIET. So they also have an ongoing relationship with the Neal Richards Group. And when you walk into these places, we’re going to set up an Investor Day. Probably sometime in the first quarter we will take you guys through maybe one or two of the hospitals as well as some of our other properties in the Dallas area. When you’re walking and you’re going to feel like you’re walking into a five star hotel. So it’s really sort of consumer hospitality or enacted the way that it’s laid out, really high ceilings and wall to wall backdrops and sort of all the stuff. But everything sort of connected within the campus but the MOD, the hospital, parking garage which we -- the parking garages come with our deal. Talya, could you add anything else there?

Sure. I think one of the objectives in the design of these hospitals and hospital complexes is that they are efficient for consumers, i. e. patients, and they are efficient for physicians. So the distance, travel distance for docs to go from parking to their kind of staging room, break rooms, the ORs is all very short. And similarly for the consumer who comes to have a procedure, they have parking that’s very close to the entry, EV access directly into the facility itself, a very simple very short travel time to their pre ops and sort of go on and on, and also for visitors coming to see patients. So there’s the facility at south, when you’ll hopefully join us in the Investor Tour you will see that it appears as one complex as opposed to a [indiscernible] several building adjacent to each other. It’s very integrated and a few [indiscernible].

And there is [indiscernible] then we took another step forward with the Frisco facility, the Southlake facility which is really opened takes another step forward, they keep on improving and I think one of the things I neglected to mention earlier is that these are all being certified, it’s a very high standard and there is an awful lot to contribute and having lower operating costs, and because it’s a physician owned hospitals, that reduction in operating cost is really put back into patient care.

Okay, and then the Fort Worth project, is the medical office buildings currently under construction? Are they already complete? I mean is the hospital ahead of the other development around the area?

The hospital, the structure parking and MOB are all being developed at the same time.

Okay, and then can you talk about the other three hospitals that this operator owns? Why weren’t they included in the transaction and is that something you would want to acquire in the future?

Well, there is only one other hospital that’s open besides Dallas and Frisco and that’s Southlake and that was recently opened. And so as that hospital stabilizes, we’re certainly in dialog with Forest Park on that one. And so the others are all going to be constructed.

Okay. Would you do a construction loan on the other two also maybe in the future?

We’re willing to talk to the Neal Richards Group about anything.

Okay, and then I guess last question. Can you talk about or explain the call and put option on the Dallas hospital? And do you expect to exercise those and if so when do you expect that to occur?

Sure. So the caller put options are in place. The call option that we have is in place based on basically a 2.5 times coverage, once the hospital reaches and stabilizes at 2.5 times. And the put option allows them to put it to us also at a 2.5 times coverage. But if it’s less than 2.5 times coverage, I think it’s if it’s more than 2 times they can still put in to us but there would be reduction in the price as well as right sizing the rents associated with the hospital. So the idea of being that fully stabilized the expectation is the building, the real estate will have a $168 million valuation. In the event that it takes longer to get to that or they don't achieve that, we'll still have some opportunity to buy it at a reduced price and if that's the case we'll reset the rents. I think later we'll step into if it provides us the appropriate level of coverages.

And really the primary reason this is in place is to allow them to have time to stabilize. The first hospital is the largest of the three that are open. The first one that transitioned from outer network to in network but if you look at their 12 month target as you would expect when you go from outer network to in network, there's a lot of fluctuation. Current trends are very good but we just want them to give them and give ourselves more time for that to stabilize. The mortgage is frankly pretty easy because of real estate value, it easily supports that. So it really provides a great hedge for us. And then similarly with the Frisco facilities, as well as its performing we think that there's more upside there. Harold talked about the coverages. We see those starting to improve as they complete their transition going from outer network to in network but the holdback provided hedge as well. So we felt like we conservatively structured the financing of these to give both ourselves and our new partners some additional time. We have already noted down progress there.

So this asset should stabilize sometime in 2014?

Yes, that's our expectation.

(Operator Instructions). We'll hear next from David Seamus with Jefferies.

Just want to turn back to Genesis real quick. Just wondering once all the synergies are achieved, what's the coverage expected to settle out at and how long is that expected to take approximately?

The fixed charge coverage, it’s probably going to be the way we calculate it somewhere around 1.3 times would be my estimate. It may be a little bit north of that. They've gotten a lot of the synergies already reflected in the numbers and there are still some more to come, but exactly how much has been reflected and how much is still to come, I would then have a really good complete handle on that but where they're at right now, where they'll probably maybe a little bit north of where they are today.

Yes, so once in a while you're going to have a dip in the next quarter, you'll have a rebound after that and as Harold says, [indiscernible] north of where it is.

Okay great. And then just turning to your investment pipeline I know you mentioned its $400 million. Just wondering if you can sort of elaborate how much of that is debt investments versus sale leasebacks and I guess as interest rates eventually do rise, do you expect to do more debt investments versus asset acquisitions?

Most of them are leasebacks. We're actively working on 25% of what's in that pipeline right now and still doing some diligence on the rest of it. In terms of whether we do more or less debt instruments, we’ve been completely opportunistic about that and that's how we're going to be going forward. So it's just going to depend on what the situation requires. We’ve kind of got to the point where we sort of pride ourselves on how flexible and creative we've been with these guys. So we'll just continue to do that. So difficult to project whether it's going to up still by how much.

And let me just add, whenever you see us do a debt investment, it's really just kind of a first step in the deal to actually get to ownership of the asset. So it's a means to an end and the objective is always to own the property, either lease or have it in an ideal structure or something, but real estate ownership is the objective and a loan is just a means to an end.

Yes, we're not going to give it back.

That makes sense, and then just on capital, would you guys go back to the preferred equity markets?

I don’t see us doing that right now. I think we have plenty of other opportunity, as I said earlier with once the ATM is activated and the volume that we think we're going to see in reverse increase and the existing liquidity that we still have even post this year, I don't think we need to go there.

And we like preferred equity markets and we definitely wanted to tap into it last year because -- one of the things we wanted to do is demonstrate that we have multiple sources of capital that we can access. But given how the rating agencies view preferred, that put a little bit of a damper on using preferred to some extent. But we do like the fact that we have that there and we have demonstrated we can access it in the future, but to Rick’s point, certainly it's on the radar screen right now.

That's helpful and then just last one. Harold I think you mentioned for the HUD refinancing that you're looking at rates at around 5%? And last call I think you mentioned 4%, given that the tenure is about the same as it was last quarter. I just want to make sure I’m understanding that properly.

Yes, so there is couple of things that have happened and treasuries have actually obviously improved here in the last couple of weeks. But one of the things that's happened in that market was with HUD. The investors in HUD are now revaluating how long this debt is going to be outstanding and revaluating their models for refinancing and it seems kind of funny to me but the model still assumed these loans will be refinanced in six years to eight years when people were doing HUD debt at 2.5%. I can tell you we’re not going to refinance our 2.5% HUD debt in 8 years. It's going to out there for 30 years. So I think part of what's happening is they're reevaluating their models on refinancing assumptions, which is driving up spreads that’s in treasures a bit but we have seen even as recently as this week, rates seem to be improving. So we're hopeful we'll get inside 5% but I feel pretty good about that be in the high end of where we might end up.

And the current rate on that debt is 5.5%, is that right?

I believe it's 5% floating, but again I think the benefits, that’s obviously here for us. Even if it ends up being 5% as we're thinking certainly it's maturing in 2015 and amortizing it over 30 years.

This will conclude the question and answer session; I'd like to turn the call over to Rick Matros for closing comments.

I appreciate everybody's time and attention this morning. As our plans going forward obviously will allow for additional calls with any of you guys with our responses. We'll be at NAREIT and then the week before Thanksgiving we’ll be doing a non-deal road-show and then the first week of December we'll be doing a non-deal road-show. So between now and the end of the year we'll be out there, very accessible and very visible and also working hopefully getting more deals closed this year. With that have a great day and again appreciate your time and your investment in Sabra.

This does conclude today's conference. We thank you for your participation. You may now disconnect.