Good day, ladies and gentlemen, and welcome to the Sabra Health Care REIT Inc. Fourth Quarter 2013 Earnings Conference Call. This call is being recorded. I'd now like to turn the call over to Talya Nevo-Hacohen, Chief Investment Officer. Please go ahead, Ms. Nevo.

Thank you very much, good morning. 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 expectations regarding our acquisition and investment plans, our expectations regarding our financing 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, 2013 to be filed with the SEC in the next couple of days, as well as in our earnings press release included as Exhibit 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 reconciliation 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.

Thanks, Talya, good morning everybody or good afternoon for those of you not in California. Welcome to the call, I appreciate your time today. We'll start out with a recap of where we've been. We had a very strong fourth quarter. As you know we didn't have a whole of activities in the first half of the year. We had a very strong fourth quarter driven by the Forest Park acquisitions and the additional investments we did on the development side with our senior housing operated development partners, and we've gone through a very good start in the first quarter. We had robust capital markets activity with the high-yield offerings. We got that done at 5.5%. You all know we replaced (8.8) million with 5.5% money. So, our cost of capital today which Harold will talk about in more details is much more competitive than it's ever been. So, we feel great about that. Our ATM is active; Harold will give you an update on that as well. We also announced last week the acquisition of Nye Portfolio in Nebraska, that's a combination of senior housing and skilled nursing, some very, very nice properties. Nebraska is a new state for us. We love the team. They have expansion plans in place for most of the fixed assets, and would like to grow beyond that, and so we look forward to having another new operator in the portfolio that we can go-forward with. In terms of our strategy going forward, it really remains the same, senior housing is a priority both in terms of stabilized assets and again, it will be primarily AL/memory care, but also on the development side. Development will continue to be a key focus for us. We've got as you know several development pipelines in place. We…

For the three months ended December 31, 2013 we recorded revenues of $37.6 million compared to $28.3 million for the fourth quarter of 2012, an increase of 32.8%. As of December 31, 2013, 51% of our revenues were derived from our leases to subsidiaries of Genesis, and 69.5% were derived from skilled nursing related assets. These are down from 64.5% and 83.1% respectively as of the end of 2012. FFO for the three months ended December 31, 2013 was $19 million or $0.49 per diluted common share, compared to a normalized $16.3 million or $0.43 per diluted common share for the fourth quarter of 2012, an increase of 14% on a per share basis. AFFO, which excludes from FFO acquisition pursuit costs and certain non-cash revenues and expenses was $19.5 million or $0.50 per diluted common share compared to a normalized $15.6 million or $0.41 per diluted common share for the fourth quarter of 2012, a 22% increase on a per share basis. Net income attributable to common stockholders was $10.4 million or $0.27 per diluted common share for the quarter, compared to $4 million or $0.11 per diluted common share for the fourth quarter of 2012. G&A cost for the quarter totaled $5.2 million and included stock-based compensation expense of $2.6 million and acquisition pursuit costs of $0.7 million. Excluding these non-cash and transaction-related costs, G&A costs were 5% of total revenues for the quarter, down from 5.6% for the fourth quarter of 2012. Interest expense for the quarter totaled $10.6 million, compared to $9.7 million for the fourth quarter of 2012, and included the amortization of deferred financing costs of $0.9 million in the fourth quarter of 2013 and $0.8 million in the fourth quarter of 2012. Based on debt outstanding as of December 31, 2013, our weighted…

Thanks, Harold. Why don't we open it up for any questions now?

Thank you. (Operator Instructions) We'll hear first from Emmanuel Korchman from CitiBank. Emmanuel Korchman – CitiBank: Hi, guys. Good afternoon. Maybe Rick, you provided some clarification on sort of how you think about acquisitions and guidance, and maybe I just got confused a little bit. So, you said previously 350 million to 400 million of acquisitions in guidance, that's included in FFO or that's not included in FFO? And then, I just kind of got lost in how you are treating Nye, so does that mean that you are now effectively 440 to --

Okay. So, our guidance excluded all acquisitions. We wanted to guide you guys for modeling purposes what we expect to do in acquisitions. But we don't include acquisitions in guidance, simply because you can't control the timing, so -- Emmanuel Korchman – CitiBank: (But when you closed) Nye, you still excluded it?

That's right. We're not going to update guidance every quarter or every time we do a deal. Part of the difficulty with it is you can't take it in isolation or look at one acquisition and update guidance when you don't know kind of the rest of the year, the timing of acquisition, the timing of capital raising activities. You're constantly chasing after something that is very, very hard to catch up to if you don't have crystal ball about your capital raising activity later in the year.

Yes. I mean in the past, Emmanuel, we have updated guidance. Once we were further into the year, we had a better sense of all that timing. And so, as I stated earlier, we may do the same thing this year. To answer your other question -- yes, go ahead. Emmanuel Korchman – CitiBank: But for the time being, there is going to be a disconnect between sort of where The Street will be in your guidance?

Yes, I think that's pretty much in line with all the other healthcare REITs, and none of it included acquisition exceptions in our guidance. So, I mean typically people are -- based on what we tell them about, what we think is going to happen from an acquisition perspective that we were more specific than most of this year. We said 350 to 400 or about 170 in the first half of year. That should allow some direction from a modeling perspective. In terms of Nye, so Nye was included in our assumption that we'd do 350 to 400 in deal activity this year. So, subtract the 90 from the 350 to 4, and that's our expectation for the rest of the year. Emmanuel Korchman – CitiBank: So, effectively if you don't close anything else in the first quarter, you're at your half of your first quarter -- half of your first half guidance?

That's right. Emmanuel Korchman – CitiBank: And then, the other questions we are following up on Nye in general. Is this –- do you expect to see structure similar to New Dawn or one of your other sort of long-term pipeline partnerships, or is this just the (six) assets that were transacted upon?

It was just the six assets, so New Dawn, Meridian, First Phoenix and then to some extent Forest Park, those have sure development components to that. In the case of Nye, they're existing stabilized assets, they were to retain the number of beds they have in most of those assets. So, we will finance that for them. But that's -- it's not being obviously our Greenfield development. And then they will be looking to grow the portfolio beyond that with other stabilized assets, and we'll be their capital partner on that. Emmanuel Korchman – CitiBank: And right now, it's just the successes they operate?

Yes, correct. Emmanuel Korchman – CitiBank: Thank you, guys.

Thanks.

We will take our next question from Michael Carroll with RBC Capital Markets.

Thanks. Rick, with the Genesis fixed charge coverage ratio, I know you have been pretty optimistic that this will improve meaningfully over time, where do you think this ratio could stabilize and how long will it take to get there?

Well, prior to this platform migration, they have two quarters in a row of 1.29 and they are getting closer back to fourth quarter. So we expect them to spend right around 1.3. I don't want to say at this point that they will do better than 1.3, we are comfortable at 1.3. We have some level of optimism, primarily because once you do a deal like this and you finally have everybody on the same platforms, it's a hell of a lot easier to manage. So, whether that yields better results or not? We will see. I'd like to think, yes, but at this point I'm just not comfortable in saying that 1.3 should be a comfortable number for them and certainly a comfortable number for us.

Okay. And then, can you give us some color on the potential new investments you mentioned with Forest Park? What are some of the hurdles that you indicated to get through to complete these deals? And they have what, how many assets that are currently in operations that you don't own yet?

Hi, Mike. It's Talya. We have one property that is open that we do not own or have an investment in, and that's their hospital in Southlake. The group that – (NRG) who is the developer, it does not control that asset. There are other investors in there alongside them. So we will wait to see how that plays out. Otherwise, they have one asset in addition to Fort Worth that what we're financing, but they have an additional asset under construction and one that they're planning to begin construction on. So, there is nothing other than Southlake that's operational today that would be up for grabs (eminently).

Correct. So, in terms of what we have on our plate with them right now, we've got the mortgage with the purchase option on the Dallas facility that we'd look forward to exercising at some point this year. And that mortgage is 110 and the purchase price 168 for the additional 58 million there. And then, we have only partially funded the Fort Worth construction loan and they will be finished building that in the spring. So that will be fully funded some time in the spring. So those are the two that are actually pending. And again, since the NRG the developers control the two new projects they started on, hopefully we will be able to work on that at some point, that's a little bit further down the lines.

Okay. And then, can you guys quantify the senior housing development deliveries that are going to start coming online in 2014? How much can we expect to move into your portfolio in 2014? I know 2015 will be a much bigger number.

There is not a whole lot in 2014; 2015 is really when everything starts maturing, then, obviously 2016 as well. But there will be some continued development this year. Talya, do you have anything on --

I think that's exactly right. I think what you're going to see is construction completions in mid to late 2014, which means -- I'll call it a 12-month lease up just for sake of round numbers will get you to 2015 stabilizations, some a little thinner in 2014, some a little later, some into 2016 depending on the size of the asset and the property type. But I think that's when you're going to start seeing senior housing in the latter half of 2015 where you're going to start to really see things start to come online into our portfolio as stabilized properties that came in through development pipeline.

The only other comment I'd make, Mike, is that in terms of the pace of developments, everybody is on target. With First Phoenix, we funded four projects with a couple of more that we'll be doing some additional funding on. We're at four projects on New Dawn. We expect to be funding a couple more with them as well. So, everybody is on target with the pace that they would be at when we first entered into these agreements. Meridian also is actively looking at additional projects right now.

Right.

So we expect to have some nice deal activity with Meridian, but as Talya said, it's also the construction development stuff primarily in 2014.

Okay, great. Thanks.

Okay.

(Operator Instructions) We will hear next from David Seamus from Jefferies.

Thanks, good morning out there.

Hi.

Hi.

Just going back to Genesis, I'm hoping you can elaborate a little bit on the disruption you were talking about from migrating to one operating platform? And what was it exactly in that that caused EBITDAR to drop so much?

Well, I don't know how people can really visualize it. But when you're an operator, and you get acquired and the operating -- the IT clinical platform that you've been working on gets changed completely. The amount of training and education, that goes into that still encoding all that. It's a huge use of everybody's time that diverts them away from kind of the daily activities. When you go into their dietary department and you give them all the menus, you tend to see spikes in food costs until they get a handle on it as well as just acclimating to all that new activities, they are going to have new vendors as well. And so, you look at that sort of all across the lines, but I think Genesis's focus was -- earlier in the year with the synergies, the things that they were doing didn't really affect the field. It was overhead integration stuff and reductions of overhead and things like that. And I think they chose to act smartly even though it's more disruptive to sort of migrate all that platforms over at essentially the same time just to get it over and done with, rather than drag it out over few quarters which might have been easier for the operations, but just what have seemed to drag on for long time. So, it might be hard for you guys to visualize, but I've been in operating -- when you are out in the field, and all of a sudden everything you can use to and you've got a whole new -- you've got whole new (cost) accounting, your GLs change completely. Everybody is just focused on change and they are not as focused on day-to-day. So, it affects everything in terms of operational process including an increase in expenses and they saw an increase in expenses. That should come out?

That makes sense.

I'm not sure how helpful that is, but it's brutal.

No, that's helpful. And then, I guess one for Harold, I'm trying to understand the borrowing capacity under the revolver a little bit. I know your maximum commitment is 375 million, but as I'm looking at this correctly, you have borrowing capacity of about 270 million. So, can you just help us understand the borrowing-based calculation that you are using, what would need to happen for you to get the full 375 million available?

Sure. It's a good question. So, the 270 million is tied into specific assets that we put into a borrowing base, and that borrowing base is basically calculation on the mortgage ability amount that they go through. And so, based on the rents that we are receiving, how much assumed debt could be supported by that rent, dictates how much that asset gives us credits toward our availability. So, because we are always in this mode of managing both the unencumbered asset to unsecured debt test, which has to stay above 150%, we haven't been able to fully put assets into the borrowing base as we've been opportunistic in taking advantage to the high-yield debt market. And so, we've managed that level of capacity, as you pointed out, $270.6 million today. So, what's happened is all of the assets that are required to support that are set aside, so whenever we go out and buy an encumbered assets, it creates more capacity under that unsecured asset -- excuse me, unencumbered asset, unsecured debt test. So, as an example with the Nye portfolio, we have now increased our availability. And so, we can take assets and encumber them, put them into the borrowing base and create more availability. So, we are in the process of putting some additional assets in right now, which should take it up closer to $300 million and $320 million over the next several months. And then, as we make more acquisitions through the course of the year that will free up more assets to put into the borrowing base, encumber them into the borrowing base. And by the time we get to call it late third quarter, we expect to have the full 375 available.

Great. That's very helpful. And then, just last one, I just want to talk a little bit liquidity -- sorry, if I missed this earlier. You mentioned you have 140 million of liquidity and then given your expected acquisition volume, 350 million to 400 million. You had mentioned earlier that you're targeting about four times leverage. I guess how should we be thinking about capital raising for the rest of the year? Is it primarily just going to be ATM? I know you mentioned that you don't really expect to do a bulk equity offering, but how should we think about sources and uses overall as you complete these, it's preferred part of the mix as well?

It's preferred, not part of the mix, we're going to say when it can get to the rest of the year because you do and get the leverage down. We may in fact look at the equity market. We're going to be opportunistic. The advantage that we have right now is that we're not beholden to doing anything. But we do want to be opportunistic, we do and get all leveraged down and the way to do that is to address the equity market. And if the markets arise and we've seen it to be opportunistic really over the past couple of years, and going out to raise money, even though it's primarily on the debt side. Well, we didn't really need it, but it's really engraved us to reduce our cost of capital. So, it's possible that we will do something. Certainly not ending it, we're just going to sort of plan it by year and jump out at once if it seems appropriate to jump on it.

Okay, thanks a lot guys.

We'll take our next question from Rob Mains with Stifel.

Yes. Thanks, everybody. I've got a follow-up to that question. You did tell -- you said like 35 million on the revolver in the fourth quarter. Do you have a census to sort of how much you could do on that in any given quarter or the target that you have internally?

Well, over the course of the year, we can do max 775. I'm sorry, in the ATM.

Yes.

Is that what you meant, Rob, the ATM?

I'm sorry, yeah, I'm sorry, that's ATM.

That's it, okay.

Yes.

Yeah, I mean we did $38 million in the fourth quarter. I think that was on the high-end of probably what we can do. We had a couple of reversing cards with larger blocks. So, I would -- I think we kind of in our own revolving model between 20 million and 25 million a quarter or it should be a month. And you can really only utilize an ATM program seven months out of the 12 months because of the blackout periods that occur. So, based on that, yes, you're looking at around a $150 million $175 million (inaudible).

And in addition to the --

Yes, periods. We're looking at by our volume, our daily volume, here.

Right. And then with the Nye portfolio, could you kind of describe those combination buildings for the most part, conceptually what it consist of?

It's Talya here. Yes, it is the short answer. Some of the buildings -- revolving are all set. But most of these in the balance are kind of a mix. So, I'm building this time is predominantly IL, but has but AL in it. Another building has mostly is mixed IL/Al and has have an expansion on it. So that has a true continuum of care and play. It's really a mix, individually.

From a dollars perspective, Rob, is that start from the top-line perspective about 50% is mixed and 40% is senior housing. From an EBITDAR perspective, it splits about 60% of senior housing with 40% of mix.

Okay. And are you seeing a lot of those sorts of combination buildings for the portfolio, what we've been asking is the -- when you've got that sort of mix, does that change the cap rate, and that is this can be a blend of those figures that you gave us earlier, Rick, like 7% for IL, 7.5% for AL, the send out date for AL? Or does that move the cap rates one way or another?

We really -- in the Nye area, we really tried to broaden, we just increased the number of beds in units and most of its sort of traditional cap rate ranges that are different asset classes and blended it, came out to sort of just under 8% kind of all-in because the majority of beds are not (SNF) beds.

And we also looked at -- we looked at cap rate component, we often looked at it on a coverage component as well.

Right.

Right. Okay, that's all I have. Thank you.

Thanks.

Thanks.

(Operator Instructions) We'll hear next from Collin Mings with Raymond James.

Hi, good morning out there, everyone. Just a couple of quick follow-up questions just on the -- can you talk about just the earn out that's related to the Nye portfolio and just kind of the targets related to that and then maybe just kind of a little bit more color around just the expansion projects and different opportunities you see going forward as part of portfolio?

Sure. So, there is a time window in which we're giving them our opportunity. And it really has to do with value. We'll fund these sorts of projects that they have slated, and value creation kind of similar type of underwriting is what we did at acquisition, but escalated for time value, if you will, after a 3% escalation on the lease rates. Any value created above them beyond cost is sort of they got -- they are paid for as capital investment. And that's in our rentals reset. That is and we're doing at a portfolio wise. So, it's a one, one time event not for projects, not individually. So, it's really a -- it's almost, if you characterize it as promote for them. So, what happens is we -- yes, to the extent that they, you have major improvements in operations and want facilities, they have to put a lot of capital there, and that kind of ups the credit, the credit if you will, the credit enhances (every now). So, they benefit for that. So, really that is worth like promote. What was the second piece you asked, what kind of project?

Right.

One of their buildings which is -- it sounds they are like flagship building as in Lincoln, Nebraska. They just did a new -- it's a mid-rise building that was they bought and converted as in IL/AL. They had a small number of net set figures. They completed an addition, sort of a mid-rise addition that is next there is one or two patio homes, one or two.

Yes.

One or two.

Got that.

They want to -- they have a master plan for that facility to add patio homes, to add more IL/AL. They have a beta brand scheme for that. So, that's a scale of that one. Others, they have much more modest. It's an opportunity to add that in allocation into putting out our view, where as -- and also it -- I think -- they have an opportunity to ask that and put them into service and it's very simple. Not brand new master plan construction.

That's it, okay.

They continually vary.

Okay, great. Thanks for the extra color and good luck during the quarter.

And then, they were really just the main operator in Nebraska. They've been there for a really long time. They had great regulatory asset, and just as an aside, for those -- anybody that's seen the Nebraska movie, which was directed by Alexander Payne who is from Omaha. He was a resident in the facility -- in the movie. And one of the administrators is in the bar scene in the movie. And they had the red carpet premiere like days after we were out there visiting the asset.

The evening we were there.

The evening we were there. So everybody was really excited about kind of getting self on the mat. So, that was pretty cool.

So, you can place Norfolk and Nebraska, on your -- were some places you go and visit.

And at this time, this concludes our question-and-answer session. I'd like to turn the call over to Rick Matros for closing remarks.

All right, cool. That was probably a bit of closing as I can do. So, thanks for your time. We're all available to take calls with you guys. And for those that are going to be at the Citi conference, we look forward to seeing you there next week. And we're just looking forward to having our best year yet. So, thanks again to your support. Take care.

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