Please standby, we are about to begin. Good day, ladies and gentlemen. And welcome to the Sabra Health Care REIT’s Second Quarter 2015 Earnings Conference Call. This call is being recorded. I would 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 the acquisition and investment plans, our expectations regarding our financing plans, our expectations regarding our Forest Park investments 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 and our Form 10-Q for the quarter ended June 30, 2015 that are on file with the SEC, 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. Thank you, everybody, for joining us this morning. I’ll start the call off by giving everybody an update on Forest Park since that’s foremost in everybody’s mind. I think, as everybody is aware, we’ve been negotiating a solution to this with a new management team who are now already bringing in new capital. The Dallas facility has been renegotiated as you can see in the disclosures. The loan was funded and we have a much more favorable purchase option on the Dallas facility, if in fact we choose to exercise our purchase option. And I would remind everybody for Dallas and the Fort Worth facility, we’re on a different situation than we are with Frisco because we’ve got dead investments there. The values of real estate far exceed those investments and we have another 15 or 16 months to full year [ph] and we’re going to have to make the decision on whether we want to exercise the option on those facilities. We did get new appraisals done for our three facilities and the appraisals reinforced our regional thesis and notion that the value of the real estate on the three facilities combined exceeds our investment and with operations, it gets that much better. On the Frisco facility, we negotiated a memorandum of understanding, as you can see on the disclosure. And the loan was funded into escrow but the loan has not closed yet. It’s been a few weeks now, so we are concerned that it may not close. We don’t have enough clarity of information because it’s being negotiated between the new management company [indiscernible] as to whether it will close or not. So we’re going down a couple of different paths right now. One, we are in early discussions with another hospital company that is…

Yes. Thanks, Rick. Yes, I’ll provide an overview of the results of operations for the second quarter and our financial position at the end of the quarter. And I’ll also provide some details around the Forest Park investments and our EBITDA guidance for the full year 2015. For the three months ended June 30, 2015, we recorded revenues of $56.6 million compared to $43 million for the same period in 2014, an increase of 31.7%. As of June 30, 2015, 32.1% of our annualized revenues are derived from our leases to Genesis, down from 46.8% a year ago. In addition, our annualized revenues from senior housing assets has increased to 33.6%, up from 13.4% a year ago. FFO for the quarter was $27 million and in a normalized basis was $33.4 million or $0.53 per diluted common share. This was normalized to exclude $4.3 million of non-recurring or unusual acquisition pursuit cost associated with the Canadian portfolio and the innermost [ph] portfolio acquisitions. And $107,000 of the fully operating costs associated with an asset transition to a new operator in 2014. This normalized FFO compares to $25.1 million or $0.57 per share for the second quarter of 2014. AFFO, which excludes from FFO acquisition pursuit cost and certain non-cash revenues and expenses, was $30.7 million and in a normalized basis, was $30.8 million or $0.52 per diluted common share, compared to $23.6 million or $0.53 per share for the second quarter of 2014. 2015 AFFO normalized to exclude $107,000 of the facility operating cost previously mentioned. For the second quarter of 2015, we reported net income attributable to common stock holders of $14.3 million or $0.24 per diluted common share compared to $12.2 million or $0.28 per diluted common share in 2014. G&A cost for the quarter totaled $9.9 million…

Thanks, Harold. We’ll open it up to Q&A now.

[Operator Instructions] We’ll move first with Josh Raskin with Barclays.

Hi. Thanks. Harold, I just want a quick follow up. I just want to make sure I got the numbers right. When you say Frisco is $0.10 the normalized FFO and $0.09 for adjusted, what was the $0.03 and the $0.05 from Frisco that you had mentioned before?

As related to our guidance or as related to our actual numbers? Because the $0.03 and the $0.05 relates to the reserves - I’m sorry, relates to the first half of the year. So basically, the $0.03 and the $0.05 are what’s in our actual numbers through June. And the $0.09 and the $0.10 include booking additional revenues under the amended lease for the balance of the year.

Additional reserves.

No, additional revenues.

Additional revenues. Okay. No additional reserve.

Right. That’s why it’s a little bit more on the normalized FFO. Okay. So that’s helpful. And then just second, there was a mention obviously in the prepared remarks, Rick, about competition and it not impacting pricing. So I guess, what is your commentary around in terms of what is it impacting? Is it just impacting sort of there’s a blood of property out there now? Or what exactly is the competition creating?

Well, I think a lot of us have been talking about their experience [ph] just a lot of product in the market because people view this as it’s not the peak, a high point in the market and so all the brokers have been shaking the trees and so convincing people to sell it when they [ph] might not ordinarily sell at a particular point in time. So that continues. What we’ve seen differently more recently is we’re seeing deals break down. And we’re seeing deals get recirculated at lower pricing. So now, it’s early on, so that and inflection point, it hasn’t really caught up with general pricing yet. That remains to be seen. But we’re just seeing some changes in the market now that would indicate to us that maybe we have hit a peak and maybe we will do some changes in pricing going forward. But it’s too soon to tell.

And that’s all senior housing. Is that what you’re saying?

It’s senior housing and skilled nursing.

Okay. And then just lastly, I mean obviously, maybe even in context to Frisco, there’s been a couple of hospital assets. I know they might have been a little bit big for you guys to look at. But have your thoughts on hospital asset changed and do you think there’s opportunity there?

Yes. No, it really hasn’t changed. I think there are a couple of things here. In terms of our first hospital, TRMC, we had sort of a large [ph] operator out there. And as we saw, it was tougher than to compete in the market and then when a tenant came in and took over OpCo, things have changed dramatically there. So I think with the right infrastructure and right operator, I think the hospital generally is in good shape on a go forward basis. And I think as most people I think benefits from ACA. It’s a little bit different with the Forest Park investment because there’s private hospitals, physicians-owned. And so I think the question there is when you bring in an operator that can sort of keep a specific model intact and still have it be successful, I think that that’s a distinct possibility. Are you better off bringing in one of the guys that we’re all familiar with that will operate those hospitals in a more traditional basis, although, they’re always going to have a certain advantage there because the real estate in this case is so high end and they’re in high income markets. So that’s a little bit different than the traditional model. That’s part of accepting a solution for Forest Park generally. But to your question, we think the acute hospital market is still a good market. I think for us, we need to get this result. And as I said earlier, we’re committed to getting that result. And you’ll see our focus from 800 senior housing and to a lesser extent, skilled nursing at least for the foreseeable future.

Okay. Thanks, Rick.

[Operator Instructions] We’ll move next to Sumit Roy [ph] with Citi.

Hi, thank you.

Hey. Hi, Sumit.

Hi. On Frisco, I understand that it’s a relatively small part of your overall revenue. But if you were to assume kind of a reasonable rent coverage and assume a similar cap rate to what you guys paid, 8.5% to 9% I think at $120 million, what do you think the value of the asset could be now if you were to sell it?

Well, so we got new partners and we got the appraisals done, which should give us a sense of where they could come in. Frankly, we don’t want to get into that - make any assumptions in that going forward because we’re going to start a process here. We want it to be a competitive process. We just don’t want to negotiate against ourselves and certainly at a call like this.

Okay. Fair enough. The other question I had is we were looking at the coverage to the skilled nursing portfolio. And it just seems like it’s been on a little bit of a downward trend, but then your remarks are that coverage has improved at Genesis. And it seemed to have sort of stabilized or gotten a little better with some of your other operators. Can you help me kind of square those two? Is there something - what am I not -

Yes. No, I think part of the issue for us, we talked a little bit about before, we’re reporting coverage on stabilized properties. And we don’t have that many stabilized skilled facilities outside of the Genesis portfolio. And so I can say for basis [ph], for example, there’s only 19 facilities in there. And we had four of those facilities that at a year-over-year basis had some operational issues, nothing that we’re concerned about. But when you’re reporting on such a small number of assets, it only takes a few of those to sort of bring down the whole [ph]. But we don’t have any assets in that group that we report on that we’ve got long-term concerns about. Obviously, we’ve done a little bit tweaking on the Connecticut assets, so we’ll sell a few of the Genesis assets. But you’re not going to see a whole lot of divestiture activity there. So it’s really just a really small base numbers that we’re reporting on. And for a couple of having a few down months and it just throws everything off.

Okay. And if Genesis were to buy out the other two leases, what kind of amount would that be and what would it do on the rent side?

Well, they are buying out all of the leases.

Oh, sorry about that [ph].

Yes, they’re buying out all five. The agreement we struck with Genesis is that we’ll reduce the revenues by - their rents by $2.1 million. And if we’re able to re-lease those two buildings by an amount greater than $400,000 per year, we’ll give them a little more really. So it’s going to be on the margin. It could be at a couple of $100,000 of REIT reduction from Genesis if we replace those with other operators. But that’s basically the whole deal. There’s no more amounts coming after that.

Okay. Thanks for the clarification.

And we’ll now take a question from Juan Sanabria with Bank of America

Good morning, guys. How are you?

Good. How are you?

Good. I just wanted to follow up on Forest Park, sort of a big picture question and kind of take your brain your brand about what you think maybe you learned or what you got wrong that you didn’t maybe appreciate as a risk for Forest Park that could take it as a lesson kind of going forward.

Sure. I appreciate the question. So I think from a diligence perspective, we exhaust the diligence and as you know, engage a third party to do sort of a soup to nuts assessment of everything about the business in the market. So I think we feel comfortable there even in hindsight. The risk I guess was we knew that the hospitals will be transitioning from out the network rates with the insurers to in depth work rates. And at the time we were comfortable that the existing management company would be able to effectively negotiate that transition. And look, at any kind of situation, regardless of asset class, you’re able betting on management. And these guys had tremendous experience in the hospital sector, all that checked out really well. But when it actually came to the execution of that transition, they failed. And so you self-critique this and we haven’t given ourselves a break on that self-critique. I’m not sure what signs we missed, that we could have missed that would have indicated to us that it wasn’t the right management team, which is what turned out to be the case. But that also goes I think to my earlier comment that on a go forward basis and so I guess this is the ultimate takeaway for us is that anything that we may or may not do in this asset class and, as I’ve said, we have no plans to do any of that in the foreseeable future. It would have to be with a large enough operator that we felt that resources and infrastructure were there to sustain any kind of bumps in the road because every business at some point has some bumps in the road.

Great. Thanks. And I think your currency mix comments about remaining leverage neutral to fund, the incremental $195 million of deals from the pipeline. Are you assuming, I guess, the use of the ATM to fund that? And how do you think about, I guess, your cost of equity given how the stock has been the last couple of days or the last few weeks I guess?

Yes. So to be clear, you’re right. The guidance does include an assumption of being leveraged neutral. It also assumes that we’re issuing equity basically where the price is today. And it assumes somewhere around $100 million on the ATM to keep that leverage neutral. And so while obviously we’d like to see the stock price improve, based on the cap rates that we have for these acquisitions that we’re looking at and the spreads that we’ll get even at the stock price today, we’re comfortable with issuing equity at this level, to those levels. We obviously will be judicious about it and don’t want to get super aggressive. And we just we want to match funds to maintain leverage. But obviously if the stock price was better, it would give us an opportunity to further delever, but we’re not going to force that issue at this point.

And just a last question maybe for Rick. Any thoughts on the potential change of enforcement [indiscernible] for SNF [ph]?

Actually, a lot of the skilled nursing providers - when everybody knew these changes were coming, whether it’s the readmission changes or condition changes, everybody knew that that stuff is coming. And many of the providers out there already operationalized a lot of that stuff. So when the estimate on the cost of implementing all that as I - in my discussions with the trade association, that represents most of the providers in the sector. It’s really hard to validate that number simply because there were so many providers that have already operationalized a lot of that. I know for the providers that are in our portfolio, they’ve all been working on this stuff for quite a while. So they’re assuming that it should happen. I think it will improve the business that will improve the overall quality of the business, that will improve the outcomes. So over time, everybody needs to sort of get with this and do it right way. So I’m not really bent about it.

Thanks.

We’ll now take a question from Rich Anderson [ph] with Maximum Security [ph].

Hey, thanks. Good morning. So Rick, how would you characterize or prioritize, I should say, the three options that you verbalized earlier in the call between the real estate sell or change OpCo or execute the stated reset plan?

It’s a fair question. I think we want to [indiscernible] get long to try to get this close. At this point, we don’t want to wait any longer, which is why we’re pursuing these other options. So we want to go to [indiscernible] simultaneously and then be able to look at all those options that we have in front of us and make the best choice. This is a pain in the ass, okay? And so it’s really you either stand here and say, the best and easiest thing to do is just get this thing out. Just invest it, the Frisco hospital. But we want to make sure we’re doing that for the right reason. So eventually, that’s kind of where you want to go. But if we can get the right operator in, even with all the problems the hospital is having, and you can see a modest amount of improvement here - and they’re struggling, any time you got noise around a business, it affects your business. But what we saw happen at TRMC was a great outcome for us. And that’s a great asset. And the value continues to build there because of what the tenant is doing. And so if we can come up with that sort of reasonable option, we’d like to do that. But we’re not going to let this linger. And we are completely comfortable with divesting the asset. So I know that doesn’t specifically prioritize it for you, except that hopefully you understand that we’re going to be done with this one way or another.

Yes. I think that the biggest problem is you’re spending so much time on this call talking about it when you could be talking about all the other good things that are going on. And that goes away instantly for the sale. So turning to other topics. You mentioned the pipeline of $800 million, 100% of that is senior housing. What do you think of that in terms of coincidence of the supply issues that are hitting the market, maybe current owners are frightened by that? Do you think that supply is playing a role in people’s desire to sell senior housing today?

I think it’s less - that could be a part of it. This is Talya speaking. I think a bigger part of it is there is a sense that the feeding frenzy in the market and the demand by buyers is not going to last forever. And better get in now while you can. Rick mentioned, the brokers have been out there holding seminars, webinars, advertising that now is the time to sell. And they’ve been working up potential sellers who haven’t necessarily been focused on a sale to do so. I think that’s generated actually a lot of the activity. You do have some institutional investors who are trading out, rotating out of certain assets they’ve been in for some period of time. You have assets that have been developed and are pre-stabilized or reaching stabilization and are being sold. You have those. But I think a lot of the product we’re seeing is people who are thinking, well, if I’m ever going to sell, maybe now is the best time to sell.

Okay. Third question. A lot of your peers that are engaged in new idea construction [ph], I know it’s not your thing, but are hanging their head on the flu season as to why things are slowing down with eastern part [ph]. Are you seeing flu impact your numbers or have you in the past, sort of three, four, five months?

No, I don’t get it. I don’t see it. I haven’t seen it in our senior housing portfolio. And I also don’t see it in our skilled nursing portfolio. For what it’s worth, having spent so many years operating in the business, on the skilled side, we always benefited from the flu season because you had more patients coming with respiratory issues, you had more Medicare coverage. And so we’re not seeing any of that. So everybody is brought in to this whole narrative for whatever reason. But we haven’t seen any evidence of it.

Well, I haven’t, so I’m asking you. And then last question, maybe Harold, Genesis, do you just have a timing? Is it third or fourth quarter, the buyout?

It’s likely in fourth quarter.

Okay, great. Thank you.

Yes.

Thank you.

And we’ll now take a question from Michael Carroll with RBC Capital Markets.

Thanks. Have you guys started marketing the assets for sale, the Forest Park assets? And then how would you position the sale? Would it just be the Frisco asset or would you be willing to sell all of them?

We haven’t formally - we’re in conversations to get it started. So the process should start in the near term. In terms of positioning, yes, I think at this point we’re just going to sell the Frisco asset. We’re in a different position in the other assets besides the fact that we’re over collateralized. We don’t own them yet. It’s just a dead investment. So there are a number of steps that we have to go through to be in the position to sell those. And so it overcapitalizes - Fort Worth is, for example, to make the additional investment right now to exercise the option to purchase it, we don’t think it’s a smart thing for us to do. So it would just be the Frisco asset. And that’s the one that’s really concerning anyway for everybody.

And the hospital that’s interested in the whole platform, is that the same NASDAQ-listed operator you mentioned last call?

Yes.

And is that operator willing to take just Frisco or would it have to be all or nothing?

It’s not all or nothing but they want at least several of the hospitals. They’re talking to one of the other hospitals that’s not one of ours. They didn’t want to just do one though. They wanted to get a few under their belt. They have a pretty significant physician network that’s part of their business. And so one of the reasons that they want a few of these hospitals, if not all of them, is that they can bring physicians into these hospitals relatively quickly. And it just helps their business model because that’s one component of their business model.

And they’re interested to purchase it, not lease it, correct?

No, they just [ph] OpCo. They’d lease it.

Okay. And then my last question on the Frisco asset. Have you seen many physicians, I guess, leave the hospital recently or has the operator been successful bringing in new physicians at all?

We haven’t been losing physicians but we haven’t been getting new physicians. And so you’re basically static. The fact that they’ve had the volume improvement that they had year-over-year in May, so the last of the existing physicians that are there, they’re able to just bring more cases in. But clearly if this was resolved, then not only would they be able to bring new physicians in, but they’d be in a better shape as vendors, they’d be able to handle more cases than they currently can actually handle. And that’s a restriction on them right now what they actually can financially handle. And that was one of the reasons we felt good about the memorandum of understanding because even given sort of all these headwinds that they’ve got going against them, the memorandum of understanding was supportable. And their June results demonstrated that. But, again, the whole thing is just taking too long. And so we’re all - to the earlier question, I didn’t exactly prioritize which way we would go. I’d say it’s more likely than not that we won’t have the asset.

Okay, great. Thank you.

Yes.

We’ll now take a question from Tayo Okusanya with Jefferies.

Hi, yes, good afternoon, everyone.

Yes.

Hi, how are you? When you talk to the Forest Park guys, what exactly are they telling you in regards to the delay in the financing? What’s really causing that?

They’re telling us that they - lander [ph] needs to get some legal consent they had a hard time getting. Frankly, Tayo, particularly after they funded Dallas and then funded Frisco into escrow, there was no reason not to expect that Frisco was going to close. So whether there’s something else going on or not that they’re not being candid with us about, that may be the case. So we’re kind of over it. We’re tired of waiting and we’re tired of listening to what they have to say.

Got it, okay. That’s fair. And then, Harold, in regards to the straight line receivables and as well as the unpaid rent receivables, how much at this point is not reserved for?

$4.6 million is not reserved for.

Okay, so $4.6 million, so that’s in total so that’s -

Yes, and it’s about $2.2 million or $2.3 million on cash unpaid rents is not reserved for.

I’m sorry, say that again. $2.3 million of cash rents is not - okay.

It’s about $2.3 million of cash and about $2.3 million of straight line receivables that are not reserved for.

Okay, that’s helpful. And then just the last one for me on this topic. I mean, if they ultimately end up not being able to get the financing, how do you kind of think about next steps?

Well, that’s really what I was talking about earlier. We’re not waiting for them to get the financing at this point. We’re talking to this other operator that we think is potentially a viable option. They’ve got a real high level of interest. So we’re not taking that for granted either. The outcome that has the most predictable ending is to go through a sales process with Frisco. And that’s why we are going to undergo that process. These guys may get the funding, they may not. This other operator may be viable, they may not. We feel like we’ve taken enough time here to let the new management company play this out and we need to have another process in place that definitively resolves this once and for all. And as we’re going through the sale process, if one of these other options turns out to be viable, then great, maybe we do that. But at this point, we need to have a definitive end to this whole thing. Again, to the earlier point, this is a pretty small piece of our revenue base and look how much time we’re spending on it. And we had a really bandwidth [ph] quarter, we’re having a really good year. And the reaction to this is really outside. This is not the prediction [ph] of our rate exposure.

Tayo, let me just add one comment to that. And that is, the other thing that we haven’t talked a lot about that’s out there, it is in the 10-Q MD&A discussions that we do have guarantees from the physicians. And those guarantees total somewhere around $20 million. So that gives us optionality for a couple of things. Number one, if we were to do an outright sale, there is some ability to recoup the rents that were unpaid at the time of that sale. Secondarily, it gives us some optionality to allow us to - if we’re going to bring in another operator, to get cooperation out of the physicians as we negotiate how we might structure that new lease and their guarantees, maybe giving them some relief on their guarantees. So while there is the potential approval to sell outright, there’s the chance that we would never collect any of those rents through the normal course. We still have the support for those guarantees that would be considered as well.

And the other point, Tayo, I’d make is we’ve been in continued communication with the chairman of the Frisco board who’s a physician, most of the Board of Physicians. And we’ve got a very good relationship with them. We’re cooperating with each other. They’re hoping they want Frisco to do well, they want to stay there, they want to be able to bring more docs in. They appreciate the fact that we have been a really supportive and flexible landlord through sort of the difficult times that they’re going through. So we’ve really made an effort to maintain transparency with these guys and talk with them on a regular basis, including just twice even the last week. And we’ve attended their board meetings. So from that perspective and just to add on to Harold’s point, we’re making sure that we’ve got everybody onboard with whatever direction that we go, including not just sale of the facility, which we have discussed with the board, but also this other operating company who they’ve had discussions within their light [ph] as well. So nothing is being done kind of behind closed doors because we recognize and fully understand obviously the value that they bring to the table. And I think that we don’t want to take too much credit here, but I think that transparency has helped the situation in terms of the fact that we have limited physicians here.

Got it. That’s helpful. And then, Harold, just one for you. During the quarter, there was kind of - you called it unusual acquisition pursuit cost that you actually took out of FFO and typically, you take the acquisition pursuit cost out of - or you added back for your adjusted FFO. Just wondering what that unusual piece is related to that was part of FFO.

Yes, so there’s a couple of things there. They all relate to the acquisitions of our Canadian portfolio and the NMS portfolio. So a lot of those had to do with cost. It’s just getting all the legal and accounting and financial stuff in place for moving into Canada. And so they’re kind of one-time how do you feel with all the issues around Canadian legal environments, the Canadian selling environments, or FX, or hedging, all those things that went into that aspect of it were part of that number. And then another even bigger piece than that was significant transfer taxes that were paid on those portfolios that we don’t typically pay. Those totaled about, I want to say, $3.6 million. And so if you look at kind of the impact on our FFO number, historically, our acquisition pursuit costs run somewhere around 50 basis point as a percentage of revenues - I’m sorry, 150 basis points as a percentage of revenues. We were in like 900 basis points. And a lot of it is because the revenues weren’t in the numbers for those acquisitions so that they occurred at the end of the year. So we took a look at all those causes and said, well, these are one-time unusual stuff that you don’t typically see and normalized those out to give a better picture for what things look like excluding [ph] those unusual one-time items.

Got it, okay. That’s helpful. Thank you.

Yes.

We’ll now move to Chad Vanacore with Stifel.

Hey, good afternoon.

Hey, Chad, how are you doing?

Hey, good. So Harold touched on this but can you describe, are there are any other downside projections that you have in place on Forest Park in addition to the guarantees?

No, there aren’t. And I think given the value that we think the hospital has even given current operations, we’re comfortable with going ahead with the sales process.

Okay. And then on that, so last quarter you mentioned that you could have explored a sale but you thought you’d be giving up too much upside. Do you now see greater upside than originally thought given the appraisals or is the sale just a more definitive way to end the issue?

The sale is a more definitive way to end the issue. And really, as I said earlier, as we’re spending all this time discussing it, you just want to be rid of the whole damn thing, right? But the reality is these things have been really undermanaged and there really is upside. And that’s why there’s sort of a part of you that wants to still explore that. But it’s gone on too long and we don’t want to continue to explore the options of staying in there on a long-term basis without pursuing the sales option at the same time. And otherwise, this thing can go on and on and we want to be able to not just look at ourselves but we view that in the eyes and say, we’re going to be done with this one way or another.

All right, then. And then just on the Genesis buyouts. That covers all five facilities that are being divested. And so how is that going to be accounted for on the P&L?

Which aspect?

The $20 million?

The $20 million comes in as revenue and is part of our FFO number. That’s why you see us in our guidance normalize it out. And then there will be - once we make the determination to divest the three assets, then we will take an impairment charge. And keep in mind, these are legacy assets that we got at the spin that have historical book values that we inherited from Sun. And so the assumption there is that those three assets are actually closed or are going to be closed. And so there’s not any operational value in those. It’s really just a real estate value. And so there’s an impairment charge that you also see in there, in the guidance associated with that.

All right. And then just one quick one. So if the additional $200 million have acquisitions and guidance, it’s negligible to 2015? Is that then the case that you’d expect most of those would close in the fourth quarter?

They’re going to close either on the fourth quarter or well enough into the third quarter that they have almost no impact on the numbers.

All right, that’s it for me. Thanks.

Thanks, Chad.

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

Hey, Todd.

Hey, guys. Thanks for staying on to take my question. Most of my questions on Frisco have been answered. But for Harold, you spoke a little bit about getting updated third party appraisals on the Forest Park loans. Any details you can share from those appraisals? Maybe just to get a sense in the loan-to-value and any reduction in real estate value since it was underwritten? Any details you could share?

Well, the details I would provide is that for both Dallas and Fort Worth, the appraisals came in in excess of our book value, that in the case of Fort Worth, by a large margin. I would say that from a real estate value perspective, I don’t think that that has changed dramatically because it’s not really focused on the operations within those assets. It’s really just based on the market and what that real estate is worth. I would say, too, that just looking at the transactions, as Rick had said, that have recently closed, that I think bolsters an opportunity for us to come even at a higher level than those appraisals may indicate. And so we don’t want to provide numbers, if you will, from those appraisals. We’d really just let the process take place without, as Rick said, opening up an opportunity for us to have to negotiate against ourselves.

Okay, fair enough. And just finally, on Holiday, if we can just get an update there. It looks like coverage was essentially unchanged from last quarter. Where do you think that’s going to look like maybe by yearend and how did this compare into your expectations when you originally bought the portfolio?

I don’t think that’s going to change dramatically. Remember, it’s all IL [ph], so you’re looking at one-one [ph] coverage at the facility level. So the corporate guarantee, I don’t think it’s going to be much different. It’s kind of where we thought it would be.

Great. Thank you.

We’ll now take a follow-up from Sumit Roy.

Hey, it’s Michael Donovan [ph] speaking. Rick, I just had a question just in terms of equity and sort of acquisition volumes and I guess if you step back, you’ve raised almost $700 million of new equity through the three issuances in the ATM literally I think just in over a year. Stock is clearly one part of it is fresna [ph] but part of it may be other things. Do you step back and sort of say, you know what, maybe the market is telling me something. Maybe I should take my foot off the gas. Maybe I should stop issuing so much equity and buying not the market value my stock and my company appropriately rather than this continual - just pump it out, pump it out, pump it out.

It’s a fair question. And I would say we don’t look at it that way. We think that when you look at the pattern on how the stock has behaved through the end of last year for the holiday deal, the equity offering in conjunction with that, the ATM actually that we had, everything happened where we expect it to happen. We had nice roll in the [ph] stock, which came in to the double B plus. S&P bugged us as we expected. And prior to the day that we announced the Forest Park issue, even though the group was down for the year, we were at the high end of that range. So I think prior to Frisco and Forest Park generally, that our performance has been rewarded. I think the story has been understood. And I don’t think the market was telling us anything different. I think initially with the Forest Park disclosure, I think we understood the reaction because we can have a whole lot to talk about from a detail perspective on the last earnings call. I think it’s hard for investors to get their arms around hospital assets to where they have around other assets generally. And these are even more unique given the fact that private [indiscernible] position owned. So I think at the time, we understood the reaction as we went out and sort of [indiscernible] the road show and talk about what we’re trying to get accomplished. And maybe we came off of our lows. But at this point, I think as we already said, we think the reaction at this point is outshines [ph]. But prior to that announcement, Michael, we didn’t see any data point that would indicate to us that the market was telling us to slow down. We talk to our investors on a regular basis. We’ve got very large shareholders who are very comfortable with our strategy who actually think that the reaction to Forest Park has been overdone. And so that’s a long winded answer to your question.

And I would just add to that because I think Rick alluded briefly about the rating agency that I do think that our investors and us view moving toward investment grade is a very positive step. And so that’s part of the obviously the thinking as we think through the growth strategy. And as Rick said, we’ve been, other than the Forest Park announcement, we’ve been rewarded for that. And people obviously have viewed that growth - and when we look at our acquisitions, spreads that we’re getting on investments, it’s something that we’re comfortable working moving to our investment grade, which again, only requires us to grow and diversify from Genesis as an important part of the strategy.

It applies in the yield on the $350 million or so or $340 million or so in deals we’ve done this year in just under 8%. And it’s quite good on the $200 million that we’re working on closing now. So just to reinforce Harold’s point, we’re making really good investments that are changing our portfolio in a way that allows us to get to investment grade.

And how much more can you close before you have to start hitting the ATM? So how much capacity do you feel you have at this point?

As stated, we already - we assumed in these guidance numbers that we would do around $100 million or so in the ATM so that the deals that we’re closing on will be done on a balance sheet, neutral basis. So we’re completely comfortable that we can just do that much more, keep our leverage where it is. And that finishes up the interest.

So a good $200 million more of acquisitions, put $100 million off the ATM at some point here late in the third into the fourth quarter. But after that, you did have to get a larger ATM or do another marketed deal.

Yes. Our strategies always have an ATM program in place just because it gives us that optionality and it’s the cheapest way to raise equity. So as I mentioned, we only have about $70 million something available. So that indicates at some point that we’ll put another ATM up, and probably sooner than later, but it doesn’t mean it won’t happen, but we’ll put one up.

Yes. In terms of sort of behavior going forward, it’s really like any other REIT, right? We’ll use the revolver. We’ll use the ATMs and match funds. If we have a dealt hat’s large enough that it would dictate that we do something different in the market, simultaneously, like we did recently and we’ll do that. In that case, it all really worked to our advantage because the Canadian deal came before the skilled deal. The Canadian deal was funded with debt because that was the best way for us to finance that deal to illuminate tax breakage because it was a Canadian deal. And we didn’t want to lever up when we announced that larger skilled deal. And so doing a bought deal that night, which frankly was a really good deal for us. It was a phenomenal book. We had a pretty large discount on it. And so it worked out. But it’s no different in the behavior I think of any of the other REITs that are really growing.

All right [indiscernible] I guess to really resolve and translate an issue before you embark on any potential larger capital commitments because I think the last thing that you’d obviously want would be even if you have a positive spread, more equity issue than a discount and not being able to take advantage of accretive investments.

That’s exactly right. That’s exactly right. That’s our mindset and that’s what the expectation should be.

All right then. Thanks.

All right. No other questions? Hearing no other questions, we want to thank you all for your time today. And we’re available by phone and email as we always are. We got an ideal road show in the Midwest next week and so we’ll be seeing a number of you in the middle next week and we look forward to that. Thanks so much for your time and support. We appreciate it.

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