Please standby. Good day, ladies and gentlemen. And welcome to the Sabra Health Care REIT's Third Quarter 2015 Earnings Conference Call. This call is being recorded. I would like to now turn the conference over to Talya Nevo-Hacohen, 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, 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. Rick?

Thanks, Talya. Good morning, everybody. Thanks for joining us. Harold will cover Forest Park in detail including more detail around the updated guidance that we gave on our earnings release and we'll talk about 2016 as well. Then we'll give you a range of impacts on various matters to provide a better sense of the financial outcomes providing more realistic assumptions than what we see reflected in the stock price. Let me start off by talking about where we are other than Forest Park and where we're going from a strategic perspective. 2015 is extremely productive from an investment perspective. As such we'll have strong earnings growth going to 2016, including any variety of outcomes in Forest Park. So we've got no need or desire to push to get more done at this point. We did close one senior housing facility in Canada and we'll be closing the Forest Park facility but both of those were contemplated in the $200 million that we anticipated closing that we noted on the last call. So, in other words we are taking our foot of the pedal at this point and obviously the whole group's down. In terms of stock performance we are down even more obviously because of the overhang. We won't be issuing any equity to the ATM or otherwise. Once Forest Park is resolved and the overhang is removed we will reevaluate our cost to capital and the acquisition environment. Proceeds from the sales of Frisco and debts at Dallas and Fort Worth if that were to be recovered will be used to delever the balance sheet and potentially buy back stock as well. Additionally we do believe that there will be expansion capital as we go into 2016, as noted on the last call and we continue to see,…

Thanks, Rick, and thanks everybody for joining the call. It won't be quite that long, but I do want to get into quite a bit of details to paint an appropriate picture here. But I'll provide an overview of the results of our operations for this third quarter and our financial position as of the end of the quarter as well as provide some additional details on our Forest Park and our full year earnings expectations. For the three months ended September 30, 2015, we recorded revenues of $59.9 million compared to $44 million for the same period in 2014, an increase of 36.3%. As of September 30, 2015, 32.8% of our annualized revenues are derived from our leases to Genesis, down from 37.4% a year ago. In addition, our annualized revenues from senior housing assets have increased to 37.1%, up from 31% a year ago. FFO for the quarter was $35.6 million and on a normalized basis was $38 million or $0.58 per share. This was normalized to exclude reserves booked during the quarter for $2.3 million of Forest Park-Frisco straight line rental income that was recognized in prior periods. This normalized FFO compares to $24.6 million or $0.51 per share for the third quarter of 2014, a per share increase of 13.7%. AFFO, which excludes from the FFO acquisition pursuit costs and certain non-cash revenues and expenses, was $34.5 million or $0.53 per share compared to $24.6 million or $0.51 per share for the third quarter of 2014, a per share increase of 3.9%. For the third quarter of 2015, we reported net income attributable to common stock holders of $15.5 million or $0.24 per diluted common share, compared to $14.6 million or $0.31 per share in 2014. As I will discuss further near the end of my…

Thanks, Harold. Before I turn it over to Q&A, just one comment on the Canadian facility we acquired. Going back to 2012 when RIDEA just became popular we have consistently said that we're not interested in pursuing RIDEA as a growth strategy, that we will only do it in certain circumstances that make sense for us and an operating partner that we want to grow with and not with the case here. It's immaterial. It should have been a signal to anybody that we're going to pursue these things on a go forward basis. These are really the partners, we do want to grow with them and I think some of you may be aware may be aware, but Daybridge, this is the same operating group that acquired the Amica portfolio a couple of months ago in Canada. So, very strong, highly respected operating company in Canada. So, again it's one-off to be material and it doesn't -- shouldn't be viewed as any change in our view of RIDEA or our strategy going forward. And with that, let's go into Q&A.

Thank you. [Operator Instructions] Our first question will come from Juan Sanabria of Bank of America Merrill Lynch.

It's actually Josh Federline with Juan. For Dallas and Fort Worth have any of the bidders in Frisco expressed any interest in those assets?

That's a good question. Actually the books have gone out and as it pertains to Frisco we have got some strong interest and some positive conversations, it's too early to speculate our valuation at this point but the responses have been relatively quick. And yes, we specifically have gotten interest on Dallas as well and our expectation is that the sales process of Frisco may lead to resolution to the other hospitals in the portfolio as well, including Southlake which is owned by another REIT. But that said, the direction the broker has is regardless of how much interest in as many of the hospitals, that they don’t take their eyes of the ball. Frisco has to be closed. In other words, even if there is interest in our two other assets and it's tied to Frisco, we are not going to want to hold the resolution on Frisco pending other potential outcomes. When we get Frisco closed then we are obviously happy to pursue the others as well and it may happen simultaneously. But we are not going to kick off both with Frisco because that's, that really is the biggest issue.

Okay, great. And then I guess for your kind of a slightly different topic on Genesis. What's the expectation for how coverage leverage will change as they buy back some leases from you?

Yes. Buying the leases from us is immaterial, but they thought they can be buying leases from their REIT landlords as well. And so when you add -- because we have a corporate guarantee when you aggregate all the transactions that they are going to be involved with, with all the REITs that will have a positive impact on coverage. I don’t know exactly where it's going to go but they reported actually a really nice quarter and I believe they are the only post-acute company of any type for the third quarter that reported a quarter that met expectations. So they gained better even in the absence of those transactions and those transactions will hold. But I couldn’t give you a specific number as to how much coverage will improve just to make sure it improved.

Okay. I appreciate that. I think you actually answered most of my questions on Forest Park in the prepared commentary. So I'll jump the floor now. Thank you.

Thanks Josh.

[Operator Instructions] Will go next to Tayo Okusanya with Jefferies.

Hi, guys. This is actually George on for Tayo and I'm sorry if I missed this earlier, but just on the foreclosure of the Forest Park assets, I don’t know if you commented on if also likelihood that the buyer -- the current owner actually tries to prevent the foreclosure sale from happening?

Yes. I did make a brief comment but I will expand on it a little bit. The only way they can stop the foreclosure is through a judicial process, because the way our loan agreements were drafted, were we provided them with Notice of Default. They -- through the loan agreements they've waived their rights to share the default. So basically the loan was accelerated immediately. And so the acceleration of loan triggers our ability to take it to sales. So in other words, they can just come and pay our interest and get current on interest and stop the foreclosure, they will still continue down that path. So that really thinking it through the most likely way they can try to slow it down would be to file bankruptcy at the OpCo entity. But that could provide challenges for them if -- and this is what we believe is the case, if we are the only creditor in that entity and the only real assets in the entity are our hospital, we have been told by our attorney that the judge would likely not allow that to slowdown the process dramatically. But it could slow it down a month or two. So we will see how that plays out. And frankly given the value in Forest, either they are going to want to come to us I believe and try to negotiate something or do whatever they can stop it because of that obviously significant value that's in those assets. So that will play itself out over the next couple of weeks.

Yes. I want to add some to essentially one point Harold made, so that everybody is clear on it. We are the only credit issuer for both of these assets. So we're really in a fantastic position from that perspective.

Yes. That's a good point. These are in special purpose entities. They are not tied up with the operations of the hospitals. Those are under lease agreements with the hospital. So it purely is the real estate assets and our loan and that's pretty much what's in those entities.

Okay. Before trying to ballpark what's an estimated timeframe of when sort of final resolution happens on these assets, what sort of our I guess ballpark the one you could actually get final resolution?

I think on Frisco, it's probably not unrealistic to think that we wouldn't have some other contracts whether it's an OpCo or a complete sale by the end of the year, but that is going to take another couple of months so to close. So, I think sometime in the latter part of the first quarter for Frisco and may be that long for the other team but maybe a lot sooner for the other team. We have held that line because there are a number of potential outcomes on Dallas and Fort Worth and because we've got real value there that we could recognize we want to be careful that we do everything we can to capture that value and not move too precipitously.

And then I'm sorry if I missed this earlier, but when given where the stock price is now, I mean it's obviously it's sold off significantly and would you guys consider doing a share buyback?

Yes, I did mention that earlier. Once we -- we're not going to use liquidity that we have available. We're not going to use the full amount of liquidity right now to do it, and that would --because it would take a significant amount of liquidity to have any sort of an impact. But as I noted earlier, once we resolve the Forest Park issue then assuming that we're going to have proceeds from between one to three of those assets, we will use those proceeds to pay down debt and we will seriously consider using those proceeds to buy back stock as well. And certainly we agree that it's really grossly over sold when you look at the actual impact on the company. There's no relationship between the impact on the company and the stock being off [75%].

And then I guess one last from me right now, I mean in terms of the coverage at Holiday, can you serve comment on how those -- that portfolio is performing?

Yes, actually performing really well. Coverage ticked down a little bit, but we're not uncomfortable with it. In terms of where they are with their lenders and their debt covenants, they are actually ahead of schedule there. We have talked with the CEO about it. There were some rumors otherwise about five weeks ago or so, but they're actually doing very well, as they are ahead of their projections as it pertains to their lender. So, they're good right now.

Okay. Thanks. I will yield the floor.

[Operator Instructions] We'll go next to Dan Altscher of FBR.

This is actually Cole Allen on for Dan. Just a couple of quick ones, you guys have done a really great job of giving a lot of color on the Forest Park assets, so I'll shift to another aspect of the company. I noticed G&A was kind of down quarter-over-quarter. I guess could you just talk to about that, like what the run rate may be for that is going forward?

Well, it is down quarter-over-quarter, a big part of that was the outsized transaction costs we had in 2014 on the Holiday acquisition. So our transaction costs were down and just call it $0.5 million for the quarter which really is kind of closer to our typical run rate. So we have about $2.5 million of cash G&A cost this quarter which is up against $2.4 million last year. So I think if we take somewhere in that range for our corporate G&A cost on a cash basis and then our transaction costs typically are going to run somewhere around $25 million and then our stock compensation frankly can vary dramatically depending on the stock price. But that's typically -0- it was extremely low this quarter compared to last quarters as well because of the drop in the stock price. And then the RIDEA portfolio runs about $0.5 million a quarter. So, if you -- I think the bogey is what is our stock comp to and it's kind of hard to estimate, but everything else, where we were in this quarter kind of feels like an appropriate run rate given the normal level of acquisition volume.

And maybe about $4 million a quarter round about.

Right.

That sounds good. That makes a lot of sense. I guess, moving forward to these loans at Forest -- the Forest Park getting worked out, you will have either buy the properties or a lot of cash coming back. Does this like turn you guys on more to the loan portfolios? Are you doing more loans like this or doing less loans like this? I guess what is the goal going forward for your loan segment on your portfolio?

No. It's not going to incentivize us to do more loans, because the purpose of the loans that we've made, whether it's been here or development starts for whatever has been to -- is sort of path to our ownership. So, we're not a bank. We're not going to do loans, just to do loans. To the extent that we do well with these two then we had loans in place for a few years, where we have gotten 8% interest and that's great, but that's not really what the point of the loans are. The point of the loans are to give us a path for ownership. So that you won't see us using our balance sheet to be [indiscernible].

Perfect. Thank you guys so much.

We will take a follow up question from Tayo Okusanya of Jefferies.

This is George again. Just one thing, I'm considering the experience the Forest Park assets, does this change your view on the hospital sector in general?

We've always said a couple of things that I still believe. One, I think the hospital sector, generally is a winner in the Affordable Care Acts. I think part of the problem here even though we've said all along that part of the problem and it's a big part of problem with Forest Park was the operating company just really failed to execute on the transitions to be a net worth model. One of the things that I think data shows and I've actually gone back to look at research from sort of the think tank of the industry to project how sectors are going to be impacted by ACA. But ACA clearly hurts the physician hospital model, because ACA precluded the physician hospitals from participating in Medicare, Medicaid. For any hospital that I spoke about, once the legislation was signed towards 2009, I believe it was. And while the physicians were happy not to take Medicare and Medicaid because the reimbursement really isn't very good. And if you look at Forest Park, if they have had a volume that would have been available from Medicare and Medicaid while they transitioned that would have given them a lot more cushion to transition. So, that's something that is one of the things that you don't pick up in research or diligence. We outsourced our diligence to a third party beyond our normal diligence on this deal to assess the models, the market rates, everything that is going on. So this is much more extensive than anything we have ever done. So but in hindsight that clearly was a factor. So with all that said, if we were to announce a hospital deal tomorrow, I think people will probably take me out and shoot me. I think we'll be focused on seeing new housing and skilled nursing and that's going to be it on a go forward basis. I would point out though that, our Texas regional medical center, once we've switched out to a good operator and the good operator being kind of hospital corporation, that hospital is doing great. And the shame of all of this is that if we wind up getting out completely which is still probably the most likely outcome, we're going to sit by the sidelines and watch a good operator realize everything we have thought that these assets could do, but it is what it is. So, senior housing and skilled nursing that's what it is going forward.

Thanks, Rick. Appreciate the color.

We'll take a follow up question from Juan Sanabria.

A question on Forest Park, what you guys put a value on as far as like the bed, like price per bed at your Frisco or Dallas or Fort Worth facility? Kind of looking at comps across the industry it seems like perhaps a little over 800,000 is what most people have paid in the past for price per bed, just trying to get a sense.

We actually haven't looked at price per bed at all because and I feel the same way price per bed when you look at senior housing and skilled nursing and this is from a guy who has been doing deals for 30 years in this sector. Price per bed has never been that meaningful a metric because it's so market specific and the composition of the product affects it so dramatically. I bought business that had dramatic differences in price per bed because of the market we are in, but the margins are the same, the yields are the same. So we really haven't looked at it and these really are very unique assets which the problems that surround the portfolio, putting that aside, they are very unique assets in terms of comparing them to comps because when you just look at the real estate itself, this is new real estate. These are elite certified facilities. These are arguably the nicest acute hospital real estate assets in the country. I mean you may find some that are close to but you are not going to find any that are nicer so that makes it a little bit harder to judge and to judge as well.

Got it, thanks. Appreciate it.

And we have no other questions at this time. I'd like to turn the conference back to our presenters for any additional or closing remarks.

I appreciate everybody's time today. I know it's a busy day to everybody. Ventas has their Investor Day. We would -- normally we schedule our calls early than this but because of the events that were unfolding with Forest Park, we wanted to make sure that you were aware and we thought we would be with the bankruptcy court hearings on Frisco and the news report that came out on Dallas about a week and a half ago, even though that was unsubstantiated and kind of a shame that actually got reported on because things are up in the air. We needed to wait and make some decisions on Dallas and Fort Worth as well as, so that we could be as specific with you guys as possible. And that really -- that extra time allowed us to provide as much clarity as we've been able to provide in this call and to update guidance and give some outlook on 2016 as well. So appreciate everybody's attention this morning and Harold and I, as always are available for calls and we look forward to seeing a number of you at NAREIT next week. Take care.

That does conclude today’s conference. Thank you all for your participation.