Good day, ladies and gentlemen and welcome to the Sabra Health Care REIT Inc. Fourth Quarter 2014 Earnings Conference Call. Today’s call is being recorded. And I would now like to turn the call over to Talya Nevo, Chief Investment Officer. Please go ahead.

Thank you. 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, 2014 to be filed with the SEC today, 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 obligations 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, I appreciate it. Good morning everybody. Thanks for joining us and I guess good afternoon to those on the East Coast. After I finish my talking points, I’ll kick it over to Harold Andrews, our CFO and then we’ll go to Q&A after that. And so we finished off our best year yet, our strongest year yet with a good fourth quarter with 48.3% revenue growth, 8% normalized AFFO growth, 16% normalized FFO growth. We had ratings initiated by Fitch with a BB+ grading and we got our ratings increased in January from S&P to BB for unsecured notes. Our focus continues to be on getting to investment grade and it's hard to know exactly when that will happen. But we believe sometime in the latter half of 2016 that we should be able to get there. And for us, it’s more a function of than the anticipation that at some point interest rates will go up. We want to make sure that we’ve an investment grade rating that we continue to work on lowering our cost to capital. Our Genesis exposure was reduced from 51% to 36.2% on a year-over-year basis. Our skilled transitional care facility exposure was reduced from 69.5% to 53.5% on a year-over-year basis. And our government reimbursement exposure on a year-over-year basis reduced from 59.2% to 46.1%. We're reaffirming the guidance that we put out earlier in January. For the fourth quarter a summary of our investment activity, we did $92.6 million in investments of which $84.9 million was stabilized assets and $7.7 million were development investments, a number of those had been announced previously. We also successfully delivered our balance sheet by close to half a turn through an active issuance of our ATM. Our current pipeline is consistent at $350 million…

Yeah thanks, Rick and thanks everybody for joining today. I will provide an overview of the results of the fourth quarter and our financial position as of December 31, 2014 along with the summary of the various investing and financing activities during 2014. For more details of our annual results, I would point you to our Q4 earnings press release and our Q4 supplemental as well as our 2014 10-K which will be filed with the SEC later today. For the three months ended December 31, 2014, we recorded revenues of $55.7 million, compared to $37.6 million for the fourth quarter of 2013, an increase of 48.3%. Interest and other income totaled $6 million for the quarter, up from $3.3 million in 2013. This $2.7 million increase corresponds to the increase in our loan and preferred equity investments from a $185.3 million at the end of 2013 to $251.6 million at the end of the 2014. FFO for the fourth quarter of 2014 was $30.2 million and on a normalized basis was $32 million or $0.57 per diluted common share. Normalized to exclude $1.7 million of non-recurring facility operating expenses associated with transitioning two assets to new operators which means it’s less than prior calls. This normalized FFO compares to $19 million or $0.49 per diluted common share for the fourth quarter of 2013, an increase of 16.3% on a per share basis. AFFO, which excludes from FFO acquisition pursuit costs and certain non-cash revenues and expenses was $28.8 million and on a normalized basis was $30.5 million or $0.54 per diluted common share compared to $19.5 million or $0.50 per diluted common share for the fourth quarter of 2013, an 8% increase on a per share basis. AFFO is also being normalized to exclude the $1.7 million of non-recurring…

Thanks, Harold. Why don’t we open it up to Q&A right now.

[Operator Instructions]. And we’ll move first to Josh Raskin with Barclays.

I know you had some color on the pipeline and that was helpful. But I just was curious if you are seeing more incoming calls or if this is more proactive stopper reaching out. I am just curious you know to characterize how the investments are sort of coming into the pipeline?

It’s mostly incoming calls. We’ve had more inflow, at this point in time in the year than we typically have at this point in time of the year. I mean as usual, a lot of stuff that you just missed relatively quickly, but we have lot of things we're working on. So you know we have it all played out, but we feel good about the level of activities.

And the size of the deals, I mean if you are sort of thinking year-over-year, a year ago at this time, the size of the deals change or are you are getting more incoming calls for the larger deals, is that fair to say?

Hi Josh, it’s Talya. I think there’s been, since right before Christmas, there’s been a state of larger deals, even though I’d say biased towards the skilled nursing sector. And larger, I mean sort of $300 million and up. On the other hand we're seeing quite a lot of transactions that are on the $20 million to $50 million range as well with probably more of those being senior housing or small portfolios of senior housing. So we are really seeing everything from 10 million to a billion, that's the range and that's a big range.

Yeah and Josh, we're not interested in doing a large scale deal. So even though we're seeing larger portfolios like that, we're not interested in that.

Then specifically on skilled nursing, you know the rate as we calculated was up a little bit more than that 2% October bump. I guess it was up more than we would have thought. Was there some sort of mix issue in your skilled portfolio that went into that sort of you know increase in sort of rate per facility?

Yeah when those rates get published, they are sort of aggregate rates based on you know history, so every individual company is a little bit different. And my experience and that was on the operating side because we're so focused on increasing security in short stay was our rates were always slightly higher than the national average.

Okay, so you think that will sort of continue. And then I guess just the last question on skilled. Maybe you know because you obviously [indiscernible] there. Maybe just you know your thoughts on what’s going on in skilled. It sounds like you know it’s based on your earlier comments that there’s some bigger deals out there. You know not all operators are created equal obviously and we're starting to see that in this environment. So I am just curious, you know you guys talked about reducing the exposure to Genesis which sounds like you know that's pretty much where your additional target was. Do you think skilled is of more interest or less interest now? I am just curious on your take on the landscape there.

Well, a couple of things. I think for us specifically as we get our skilled exposure down to 50% and lower, you know we will be a little bit more flexible in doing more skilled deals. But that said, we don’t want to do, for us to do a $200 million or $300 million or $400 million skilled deal is really pushing our metrics you know pretty dramatically in the wrong direction. So we’ll need to do more and we're not going to bypass any bidding on any skilled deal that we like, that’s sort of under a 100 million. So that's really the focus. I think generally speaking, I think one of the reasons that we're seeing so much products on the skilled side is because there has been some more cap rate compression. You know, there were a couple of larger portfolios, call it 300 million plus, two of them that were done in the latter part last year with one of our peers. And then one was in the 8.5 cap and one was a little bit closer to eight than that. And you know I think for those, those are pretty you know good assets to pretty vanilla nursing homes. But you pay a premium for larger portfolios. The Oklahoma deal that we did in the fourth quarter, that was an 8.5 cap. But remember that was all transitional care. It’s all Medicare managed care, you know private rooms, so that's sort of a new world product. So I think that sellers are looking at the environment and saying, and then we can get 8-8.5 cap even for small deals. So you know we’ll see if that's the case and there was a deal recently that we bid on three facilities. They were nice assets, but they were you know just sort of traditional long-term care facilities. And we put what we thought was a pretty aggressive bid on them and we got beat by 10-15% by two other bidders. And that goes to the comment I made in my opening comments. And that is if those bidders that [indiscernible] are non-tradeds or PE’s, then that's fine. Because that is what it is, they are always going to pay more, but if the winning bidder on those three facilities is one of our peers you know then all of a sudden you are seeing a small skilled deal going for you know something in the low to mid-8 caps. Even though this sort of traditional long term care facilities, they are not sort of the higher acuity short stay facilities that you would pay up for. But I think part of the mentality out there is that you know even if you are paying 8+ instead of 9+ for a skilled facility, it’s still a really good yield. So I think there’s been some refocus on hey, it’s just a really good deal regardless of the fact that there maybe some disconnect where there’s usually trade.

Got you, just a quick numbers question. Stock-based comp, you know up a little bit, what’s a good runrate for 2015?

Well if you took for full year of you know $9.9 million in 2014, the hard part of about the question is what’s the stock going to do over the course of 2015, which could have that swing pretty dramatically. The year before it was about $7.8 million of 2013, so I think you know somewhere in that range between those two numbers is probably a pretty good estimate for kind of the normal course if we see just kind of a reasonable stock. I should say just a typical stock increase over the course of the years you might expect. But again, it could be significantly different. So --

Yeah and the only thing that compounds it is, it’s not just a function of us getting our annual grants. The management team continues to take, all of this annual cash bonus is in the form of stock, not cash. So really since Sabra’s inception, we’ve never taken cash bonuses and for the slate this year, to say things that compounds the impact.

And we’ll now take our next question from Juan Sanabria with Bank of America.

Just a question on skilled. It seems like yourself and maybe some of your peers are a little bit more interested in looking at SNF opportunities like you said partially because of the yield. Maybe, but could you just speak to what your sense is on the level of scrutiny by various government agencies, obviously a lot of focus on ManorCare. And now recently there was a negative article on Kindred in the press. Do you sense there’s more scrutiny on reimbursement assets and by the government to call back, to make some callbacks potentially?

No, I don’t and I’ll be specific on each situation to the extent that you know I can be specific. On the Kindred situation, one it’s a media focused attack and so they have their own agenda. But I would say this, you know when I read that article, Kindred assuming there were doctors orders for all those patients which there are, Kindred works within the rules of the system. And as the doctors’ orders want a patient to stay in for X number of days, and that allows us to maximize the system, and that's just the way it works. So you know we -- and on the operating side, you always wanted your operators to maximize your system, didn’t mean just maximizing the system within the rules. That's the way you know CMS typically works is they change the rules on you, kind of on a regular basis. The operators always figure out how best to operate within the system, within the rules. And they do maximize and then as soon as they start maximizing, CMS changes the rules again. That's just, that's like normal cycle stuff. So that said, I think you know everybody on the call knows my view in the long run of [indiscernible] and IRS in the context of the changing reimbursement environment where you are going to have a level playing field. So a lot of this stuff is going to go away, because once you’ve a level playing field whether it’s neutral [side] reimbursement, whether it’s capitation, whether it’s double payment. It’s a level playing field which I love for the skilled assets. I think it gives them a great advantage because the skilled providers have shown a lot of nimbleness relative to climbing up the acuity scale more successfully so on…

Got it and then just following up on your initial entry points about Genesis and potential asset sales. Could you just maybe provide a little bit more background or color on where you stand in the process? If you -- are you just simply trying to negotiate like if you sold them at X, what the rent hit or what rent reduction you might be willing to take? Or are you kind of not even at that point yet, just a sense of where you are in the process and the potential timeline?

So it’s very early on. So I think if we came to agreement on anything, by the time you actually got asset sales done, I think best-case scenario, you are talking you know towards the end of this year. But I think for us, yeah I think the question is you know how much of a rent hit if any, are you willing to take. And we don't have a whole lot of flexibility there from our perspective. We don’t have a lot of instances if you will to be diluted in any transaction. You know it’s different if you are you know one of the larger REITs and you know you can take a little dilution and you can get all that back plus growth in one fell swoop because you are going to do a $2 billion deal, right. You know that's not us. So you know, we don't want to take sort of two steps forward and one step back from a growth perspective. So and I think that they are great guys, they are a really good management team. They had a lot on their plate with the Sun deal and now the skilled deal. And I think on both sides, you’ve got two management teams that respect each other and are very reasonable. And you know, hopefully we can you know get to a place that makes sense. Because as I said earlier, you know you prefer your operators not to have to focus too much of their efforts on assets that really aren’t going anywhere. But again, it’s got to be something that works for us.

Okay and just a last quick question. Could you give us any color on the SNF dispositions you did in the fourth quarter in terms of cap rates and timing of the transactions?

Yeah, so there were three facilities in Connecticut with one of our operators. So we’ve two other facilities with them. We hope to grow with that operator. They are actually a really good operator. Connecticut is a really tough environment. And they just don’t want to operate there anymore. And when we looked at the facilities, we didn’t feel great enough about the facilities to say okay, let’s just move those to another operator. And particularly because in the results of the sale, you know there was slight gain to us. So you know from a cap rate perspective, do you know what the cap rate was for and it sold for?

I don’t know what the cap rate and what it was sold for. I just know that you know obviously when we evaluated the impact on our rental stream, it wasn’t that significant to us. And as Rick said, you know the fact that we were going to post a gain and not a loss on the transaction, that it just made sense to move forward with it.

And the differential in rent is included in the guidance that we put out.

We’ll now take a question from [indiscernible] from Citi.

I wanted to ask you just to clarify you said you had a -- you are looking at about $350 million in the pipeline. Is that the kind of activity that you'd like to complete this year in acquisitions, or that's just the pool of potential acquisitions?

That's just the pool of potential acquisitions. You know we may get 20% of those done. But you know it gets replenished every week. We knock that every week, it gets replenished every week. So you know we're going to be opportunistic. You know I think our normal bread and butter stuff is sort of getting to the 300 plus level, which is what we did last year and pretty close to what we did in 2013. If there are opportunities to do larger deals, then we’ll do those larger deals. And larger deals I think for us is anything over a 100 million. Larger deals doesn’t automatically mean another half a billion plus deal like Holiday. But it’s just deals that are bigger than sort of the $20 million to $50 million range that we do a lot of those. So you know we’ll see and one of the things I’ll reiterate and I discussed over the last earnings call is, in terms of doing a very large deal, you know for us the Holiday deal was transformational. We’ve seen a really nice impact on that from a number of different perspectives. And so if we were to look at a very transaction you know going forward, it would have to you know be pretty easily accretive. And we would look at it on a balance sheet neutral basis because at this point, in all likelihood it would be transformational. It would be sort of a nice gravy for us, but it wouldn’t really be transformational. So you know, we can’t really predict how much we're going to do this year. If we did you know 300 million, I wouldn’t be surprised if we did 800 million, I wouldn’t be surprised. You know we're just going to be opportunistic.

Okay and then the other thing I wanted to ask you and we can probably will need to talk to you more offline on this. But we're having some trouble getting to your guidance ranges. And I think if you look at the consensus forecasts, other analysts are having trouble getting there as well. Does your guidance assume additional share issuance, but no acquisition activity? Is that maybe one reason why?

Our guidance is just essentially organic growth off of last year. It doesn’t assume any acquisition activity. So if --

And no additional share issuance?

Right.

Right, it doesn’t assume any additional share issuances. But if you think about it, it is a range and so you know when you think about what could cause guidance to move within that range with no acquisition assumptions in there, it could be some share issuances. It could be our G&A costs. So it’s kind of hard to nail down if you will a particular number. But there are several factors that go into creating the range and certain things that we consider when we think about the range, including our leverage levels and our G&A costs.

Yeah and look we -- a couple of things. There’s always a disconnect here between us and the research estimates on us. Because everybody out there has modeled in investment activity. And we don't do that, nor do I think most of our peers do that. So that's really the driver and going back to what I said in my opening comments, we really want to be mindful of our balance sheet. And so from an equity perspective and the ordinary course of business for us, and sort of again the bread and butter type deals, we’ll use the ATM to match funds and take a balance neutral stance to our investment activity. So we're certainly not contemplating you know at this point doing anything more than that, you know such as the secondary offering, our follow-on offerings. So you know hopefully that answers your question. But we’ve our own internal forecast obviously where we do have investment assumptions. So we don't really have a concern about over the course of the year of meeting expectations.

We’ll now take a question from Paul Morgan with MLV.

You know now that you’ve got several months of Holiday under your belt, any takeaways from kind of looking at that portfolio and seeing what’s going on operationally?

Sure, we're very happy. I mean they are doing a really nice job. And there’s been a slight uptick in occupancy. The operations are just extremely steady. Our asset management team has been in a bunch more of the assets since we closed the deal. And the consistency from [indiscernible] is you know kind of going back to what I said when we announced the deal. I’ve never seen a culture in an operating company applied so consistently in every single facility. So you know and that's why you know when we got some questions early on about you know is this tranche facility as good as the other tranches that got sold. Yes it is and I think that as Holiday looks [indiscernible] so it just looks to divest the rest of the Holiday portfolio or the real estate component of the portfolio, I think the asset quality will be very consistent all across the way.

How do you think about you know as more trenches become available, you know the trade-off between kind of rolling things in to your portfolio versus kind of managing pricing on one side, but also you know concentration on the other?

Yeah, I think there’s a Holiday portfolio out there now. It’s larger than the one that we acquired and you know we just can’t do something like that. I mean we’d have to maybe change our name to Sabra Holiday REIT or something. You know what I mean, it just doesn’t work. So you know if they were to spin off smaller chunks of assets, you know we’d love to look at that. But you know we're not going to do another big Holiday portfolio. It doesn’t make any sense. It’s way too much exposure.

But we’d have a lot less to talk about Genesis and a lot more to talk about Holiday.

Right, [indiscernible] and we do the I/L REIT if we did a billion dollars on top of what we already did.

Okay and then you didn’t really mention you know much in the way of what you are seeing in terms of development opportunities. I mean how do we think 2015 might shape up in terms of you know new deals for development size?

Well first of all, we're seeing a consistent and steady stream of opportunities from our existing development partners. We are seeing some additional development. I think there are real ebbs and flow to new development deals. So while we're still seeing some, I’d say right now there’s probably, it feels like a little bit less than we probably saw three months ago. But that might have been more than we saw three months before that. So I think -- I am talking of pretty subtle ebbs and flow that are just natural. There’s -- and overall we're seeing an interest across most of the regions, but I’d say probably the eastern half of the country mostly in developing new assisted living, assisted living memory care, memory care facilities. That's kind of the bulk of where our people are focused on and probably more in the combination assets. And I think it’s probably more weighted towards the southeast, and then extrapolate further from that to sort of the Mississippi.

And we’d fully expect to add more development partners this year. We just can’t predict you know how many it’s going to be. So it’s going to continue to be an important part of our focus. But you know there’s a lot of so-called developers out there that haven’t done senior housing and think they know and that's part of the problem with some of the product that's out there already. And so we see a lot of a that stuff that we just discount. So for us, it’s really critical that we partner up even with the developer or a developer who is aligned with an operator that we trust. So that the actual design of the facility is resident and patient centric and it sort of fits the new world order.

Is that in your $350 million pipeline? Is that how you characterize it or is it separate? And if it’s in there, is it you know a material part of that?

It’s not in there.

It’s not. I don’t -- count that as zero.

And then just lastly, just on the G&A. I mean how should we think of it for 15 in terms of a runrate given some of the pieces that are moving in and out of it? I mean should we model it as a percent of revenues based on kind of where you were in the fourth quarter? And then maybe if you’ve any color on the non-recurring operating expense hit in the fourth quarter too?

Sure. So I think one way to think about it is that you kind of assume you know our recurring cash G&A being somewhere in the 5% of revenue range. And then you’ve to add on top of that some cost for our RIDEA joint venture which typically runs around half a million a quarter, which is obviously a cash item. But it’s captured in the G&A line item and then obviously you’ve got the non-cash stuff which we talked about already on the non-cash compensation which again can fluctuate pretty dramatically. But it could be you know anywhere from $7 million to $10 million for the year. And then on the one-time cost of the non-recurring items, again those are two assets that are being transitioned to new operators. One of them has been fully transitioned. The other one and we're in the final stages of negotiating a lease with the new operator. Both of those costs are associated with the time period before the leases are in place. And in one case, it had to do with -- the one with the leases already in place had to do with some old billing issues that came up, that resulting. And that's not collecting fully the amounts that we should have collected during this short time period was about 900,000. You know in the other case, it’s just funding operations, while the operator is managing the facility and putting in place their systems and negotiating the lease. And that should be coming to a closure quickly as well. So a truly one-time and nonrecurring in that, just during this period, when we're operating them and we won’t be operating it. We aren’t operating one at this point and the other one, it should be coming to a close very quickly.

And the two facilities combine. These are small facilities, but if the two facilities combine, we’ll leave it worst case whole on rent, and we could be actually slightly better.

And we’ll now move to our next question from Michael Carroll with RBC Capital Markets.

Rick, you mentioned that you expect Sabra to become investment grade by the second half of 16? What does the company have to do to achieve that rating?

Probably hope is better than expect because you never know with the rating agencies. So I don’t want them to call me after this call. But basically what they said is that our balance sheet is there, and it's just a function of size and diversification, diversification really from Genesis. And but they don't give you sort of the fine line that you have to do to get there. I think you know for Genesis, once we get them under 30%, we're not that far from that. I think we’ll be in pretty good shape. You know the size of the REIT is you know sort of completely subjective. But one of the reasons that we were happy to have Fitch rate us is because you need two out of three. And you know the fact of the matter is, is that Moody’s is much more skittish than both S&P and Fitch when it comes to skilled nursing exposure. And I know you saw that they finally made Omega investment grade, but it took Omega to get into a $10 billion market cap for them to actually do that. So that was the reason that we wanted to have Fitch in as well. So we still have two out of three. So I think based on our conversations, then when we say sort of the second half of 2016, we just look at our existing growth rate. We look at some other REITs relative to when they received investment grades and kind of make a judgment based on that.

Okay and then you also said that going forward you could delever, but you are not going to do it necessarily now. Can you kind of give us some color on that?

Yeah I think we're you know having delivered somewhat, you know over the course of the month of December to get as closer to 5, you know we're comfortable with that. It actually gives us a lot of breathing room with the rating agencies. And for us to delever more aggressively now would require a follow-on offering and we just don't see any reason to dilute our shareholders just simply to delever you know at this particular point in time, you know lower than we already are. So we don’t see any real advantage there to doing that and frankly don’t think that the reception would be that good to it as well. And so we're not going to make strategic decisions based on you know what we think the reception is going to be to our decision making.

We’ll now take a question from Todd Stender with Wells Fargo.

Just a couple of quick ones. And thanks for the color on how big your pipeline is. Can you give us a feel of what the mix might be for property acquisitions versus say loans or more preferred equity investments that we saw in Q4?

I think at this point, because we're so far along with our existing development partners, that the amount of investment activity that's going to be development oriented versus stabilized assets, it’s going to be pretty small. I don’t know if it’s going to be as small as it was in the fourth quarter, but it’s going to be pretty small. I mean if you go back over the last couple of years, where our investment activity on development projects was a significant percentage of our activity was really in 2013. And that was because, that was the year that we got a lot of these relationships going to begin with. And so everything fits in with our existing relationships has been incremental. And my guess is any new development relationships that we start, because most of everything we do is in the form of relatively small preferred equity strips with you know pretty high returns, that it will continue to be incremental.

And I think you pretty much answered this question. But just to kind of circle back with the Genesis concentration, it will likely get diluted over time as you acquire more this year in particular. And certainly, I think you were getting towards at 30% of the portfolio number, just for the rating agencies. But have you kind of weighed the fact that Genesis is now public, they are arguably more financially sound, greater availability of capital to them. And how does that kind of look at and how do you weigh that I guess with what's best for your stock multiple?

Well I think for us, we think it’s great that they are public, because we’ve got complete transparency there. And I know, you know when we do the split with Sun, one of the things that we benefited from despite the fact that we only had one tenant. So obviously that was on the one hand a negative, on the other hand the value creation opportunity was the fact they were still public at that time. And that gave everybody a comfort level. When they went private, you know everybody -- I don’t want to say they were on edge, but there was still a lot more questions. Because everybody then becomes dependant upon us representing how they are doing, though we're not going to have to do that now. And they will have better access to capital, I think it’s going to be a lot easier for them to manage their balance sheet. As I mentioned the skilled deal, you know they are getting a company that has some really nice assets, but it’s been under managed. So I think there's opportunity there to improve coverage, not just from the synergies, but from operational improvements over time. And that will take longer than the synergies obviously, so we actually -- we think that that's all good. And we think to have an operator as well-respected as Genesis being public just helps the sector. I mean things were a lot -- I think it was better for the sector when there were you know a decent number of publicly held companies. So everybody could look at a variety of data points, and you know if there is one company out there that was a problem, you know people didn’t extrapolate from that and say, this is an industry issue. You know it was easier to say no, it’s company specific because we’ve all these other data points. So I think it’s helpful to the industry and I think the other REIT’s executive teams that have skilled exposure, even if they don't have exposure to Genesis would say the same thing.

[Operator Instructions]. And we’ll now move to George Hoglund with Jefferies.

This is a question for Harold. I am not sure if I missed this in the prepared comments. But can you talk about the provision for doubtful accounts in the fourth quarter?

Sure in the fourth quarter, we’ve booked a 600,000 provision for doubtful accounts. And our policy, you know as we think about it going back over the course of the four years as we’ve grown, initially we had you know obviously one tenant and then we’ve added tenants and now we're up to 29 relationships. And as we started to think about you know our policy around reserves for both straight line rents that are recorded, because as you know we’ve a very significant amount of straight line rents that we're booking every month in a big balance there. But along with just our collectibility, our interest payments and everything else, we needed a termination based on our history in this last quarter, and this last year I should say, where we did have as an example the TRMC transaction, where we wrote off some straight-line rents. That we would take a broad perspective view of our portfolio and apply some parameters around coverages and other aspects of the portfolio and create a general reserve around collectibility of straight-line rents. So the upshot of it all is there’s nothing specific, there are no specific issues around any of our assets or portfolio. This is kind of the general reserve, not unlike you would see any company doing. And the timing was prompted really just by the fact that now we're getting larger and a more diversified portfolio of assets. And thereby we kind of have some history and some basis for making some general assumptions about collectibility. So I don't expect you'll see, you know a lot of changes there. I mean we’ll see what happens, but the criteria is such that I don't expect there to be a need for a significant amount of reserve. But we wanted to have something on the books to reflect that.

And most of our peers do have -- they do have reserves in some form or fashion, and the methodology is kind of all over the place relative to how companies approach it. So but we were an outlier for all the reasons that Harold talked about. And there was no reason for us to continue to be an outlier. So it’s really a function of having a prudent accounting policy as opposed to it being treated by any sort of events within the company.

And do you think this will be something we’ll see on a quarterly or sort of annual basis going forward?

No, we’ll evaluate it quarterly.

As Harold said, it shouldn't -- it’s unlike the stock conference kind of moves all over the place. You are not going to see that with this.

And then just one more I guess for Rick. I mean just looking at the overall you know SNF environment and looking at you know some of the key things, whether it’s the you know three-day observation rule or the shift from Medicare to Medicare advantage or just increased regulatory scrutiny. And where do you see is sort of probably you know the most important issue sort of for 2015 and how you know the operator is going to be dealing with it?

First of all, a couple of things. One, just want to point out, I don’t believe there’s increased regulatory scrutiny. I don’t think there’s any data out there to indicate that. There are a couple of company specific things that we talked about earlier that have occurred. But there's not a general increase in regulatory scrutiny and I don’t expect there to be that. I think the two things that I look at for 2015 or is there going to be a doc fix finally, a permanent doc fix, not a kick it down the can doc fix. And if there is, what’s the pay for it going to be on that. I think the industry believes that the pay for it comes from a lot of different players and that it would be reasonable. But you know at this point obviously, Congress has not been able to get that done, even though everybody wants to see it done. It’s got bipartisan support, but it’s actually got industry support. And so that's one thing I look for. The other, and it is hopefully you know end to this observation day issue. And that's a real positive if that happens, because you can at the decrease in skilled mix amongst, throughout the sector over the last couple of years and attributed directly to that. So those are really the two things that I look for. So if it’s a doc fix, it will be a one-time thing. Maybe it’s mildly negative, but it’s not dramatic. And then observation days, if they get addressed then that's positive and if it not it still is what it is. On the managed-care or the Medicare Advantage issue, that's not a new issue. You know that's being going on you know for years and it’s been a really slow growth. Most residents and skilled nursing facilities still opt for Medicare fee-for-service. So I think over some period of time, you’ll continue to see Medicare Advantage growth in the sector. But it’s still a relatively small percentage compared to Medicare fee-for-service, and so that's a multiyear kind of thing. And one of the keys there too is on a local facility basis, if you could manage it so that your Medicare Advantage isn't just replacing Medicare fee-for-service patients, but in fact it’s replacing Medicaid patients, that's actually a plus. Because while it’s certainly true, that Medicare advantage reimburses less than Medicare fee-for-service for the same patient, any Medicare patient whether it’s Medicare fee-for-service or Medicare Advantage has much better reimbursement with only incremental additional costs than any Medicaid patient does.

[Operator Instructions]. And it appears there are no further questions. I’d like to turn the conference over to Mr. Matros for any additional or closing remarks.

Thanks very much. I appreciate everybody’s time today and as always Harold, Talya and myself are available for any follow-up calls and we’ll be happy to spend as much time with you as necessary. Conference season is coming up, so we’ve got several conferences. We’ll be at over the next six to eight weeks and look forward to seeing everybody out there. Thanks again and have a great day.

And once again, that does conclude today’s conference and we thank you all for your participation.