Good day, ladies and gentlemen, and welcome to the Sabra Health Care REIT Fourth Quarter 2016 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.

Thank you. Good morning. Before we begin, I want to remind you that we will be making forward-looking statements in our comments and in response to your questions concerning our expectations regarding our acquisition and investment plans, our expectations regarding our financing plans and our expectations regarding our future results of operations. These forward-looking statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially including the risks listed in our Form 10-K for the year ended December 31, 2016 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 refurbished to the SEC earlier today. 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 made 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 supplementation information materials included as Exhibit 99.1 and 99.2 respectively to the Form 8-K refurbished to the SEC earlier today. 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. Thanks, everybody for joining us. So, I chose the Beatles' Helter-Skelter for our hall music today, because I couldn't find a song called Finely Tuned Machine, so we dedicated to 45. Let me start with talking about kind of regulatory environment and ACA. We're feeling replaced at this point is quickly up in the air and the events that happened I just need to make a couple of comments. Relative to ACA, the only component of a repeal consideration or replace consideration that would affect the post-acute sector of the Medicaid blocks grants. And the Medicaid block grants, they test the house actually twice, the number of years ago. It never got pass the Senate. But we would make a couple of assumptions block grants were to occur when they get spread out in terms of the financial building being put on the states over a period of probably around 10 years. And we also think it was a very high likelihood for a number of reasons, which we can get into later if you guys are interested that long-term care [ph] will be parked out. So that's sort of our view on back grants. In terms of everything else, it's early CMS that's driving the train in terms of what affect the post-acute sector. And the only thing we're hearing about that that may change is that secretary pricing, stop the mandatory bundling. So, the margin that's helpful never affected a material portion of skilled population. And I think there will be a number of action to it, but if it’s a mandatory bundling, it stopped and then it will just help a little bit on the margins. So, that's kind of our view of what's happening relative to ACA and CMS. I'll move onto our strategy…

Thanks, Rick. I will provide an overview of our results for the fourth quarter and our financial position as of December 31, 2016, as well as provide some details on the Genesis asset sales and some initial insights into earnings expectations for 2017. For the three months ended December 31, 2016, we recorded revenues of $61.8 million compared to $66.8 million for the prior year, a decrease of $5 million primarily due to the exit from the Forest Park investments earlier in the year, which provided $7.6 million of rent and interest during the fourth quarter of 2015. This reduction in revenue was offset primarily by incremental rental income from our acquisitions. FFO for the fourth quarter of 2016 was $40.7 million and on a normalized basis was $40.6 million or $0.62 per diluted common share normalized to exclude the recognition of $3 million of lease termination fees, $3.2 million of provision for doubtful accounts and loan losses in excess of related revenues recorded during the quarter and a $0.4 million gain to related to our interest rates swap activities. This normalized FFO compares to normalized FFO for the fourth quarter of 2015 of $41.9 million or $0.64 per diluted common share, normalized to exclude a $2.6 million interest income catch-up from the Forest Park worth [ph] loan $5.3 million a provision for doubtful accounts and loan losses in excess of related revenues during the quarter. And non-recurring or unusual acquisition cost of $0.5 million associated with an acquisition closed in that quarter. AFFO which excludes from FFO expense acquisition pursuit cost and certain non-cash revenues expenses was $38.8 million and on a normalized basis was $35.7 million or $0.59 per diluted common share for the fourth quarter of 2016, compared to $36.2 or $0.55 per diluted common share for the fourth quarter of 2015. 2016 AFFO normalized to exclude the same lease termination fee and other insignificant items reducing AFFO by $0.1 million. 2015 AFFO was normalized to exclude the same excess interest income impacting normalized FFO in 2015 and $0.6 million a provision for doubtful cash income in excess of related revenues. Net income attributable to common stockholders was $20.6 million or $0.31 per diluted common share for the quarter compared to $22.5 million or $0.34 per diluted common share for the fourth quarter of 2015. I’d like to briefly point out that we have changed our accounting policy to the early adoption of [Technical Difficulty]

Again, we are allowing people to rejoin the conference. And it does appear that we have most of our participants have rejoined, just a few are still standby to be answered.

So, why don't we resume.

Okay, very well.

So, thank you for your patience, we have no idea what happen, we’ll find out other than the fact that it's in parallel sort of talking about the change in the accounting policy, you all seem to drop off. Harold will resume nevertheless.

At the risk of losing again, we will start right back. What I was talking about, we've changed our accounting policy, the early adoption of accounting standards update 2017-01 business combinations, which clarifies the definition of the business combination. Under this new standard, acquisition subsequent to October 1, 2016 were considered asset acquisitions and we have capitalized the acquisition cost associated with these investments, rather than expensing them as we have done in the past. We expect future acquisitions, pursue cost will be capitalized when associated with the completed real estate asset acquisition, thereby reducing our G&A cost going forward. G&A cost for the fourth quarter of 2016 totaled $4.4 million and included stock-based compensation expense of $1.4 million excluding these costs, our recurring G&A cost were 4.9% of total revenues for the quarter. Interest expense for the quarter totaled $15.7 million compared to $16.1 million in the fourth quarter of 2015 and included the amortization of deferred financing cost of $1.3 million in each quarter, based on debt outstanding as of December 31, 2016 our weighted average interest rate excluding borrowers, borrowings under the revolving credit facility was 4.55% and taking our interest rates swaps into consideration only interest on a revolver remain subject to interest rate fluctuations which currently represents two 2.2% of our total debt. Borrowings under the unsecured revolving credit facility their interest at 2.77% as of December 31, 2016. During the quarter, we recorded a $2.3 million provision for doubtful accounts in loan losses compared to $6.2 million in the fourth quarter of 2015. The current quarter provision is primarily related to straight line rents. During the quarter, we recorded other income of $5.3 million primarily consisting of a $2.6 million lease termination fee associated with a $10 million amount previously paid by Genesis. $1.6…

Ladies and gentlemen, thank you. [Operator Instructions]. We will go first to Chad Vanacore with Stifel.

Hey, good morning.

Hey Chad.

So, thinking about the non-guidance that you put together. What went into those or which we factor beside the timing of dispositions in there?

It's just a timing of dispositions. We had a pretty good line on when everything was going to close before Genesis to target to stay on those assets and we were face of making the decision to either stay in the Genesis in that sell or just for the real estate and you know as I said we are just committed couple of our comments to aggressively get in Genesis exposure down. So, factors [ph] stock would scratch and go to a different buyer pool, so the buyer pools there, we’re making progress on it, it’s a big enough issue that on that timing changed to contemplate whether it make sense to put out guidance that was actually going to have to be changed and we’ll do our first quarter earnings anyway. So, if you go up the run rate and then we’re confident at this point there we able to give much more solid guidance and real guidance on the first quarter call.

All right. So, thinking about the dispositions with Genesis, there is three - they are staying, how much do you think that backs at the timeline, you put out there that you think by 3Q but what factor could push that back unit further?

We don't think it's going to get pushed back further. We had said that prior to the change, we get the 35 sales done by the end of the second quarter if not sooner and this just pushes that we think to early third quarter. So, at this point we don’t see any way it gets push pass third quarter.

Okay. And then just thinking out fundamental their cross skill nursing we expect pressures in 2017, how you can that ultimately impacts your coverage on the snip portfolio?

Well obviously we must have a different snip portfolio, because our coverage’s continues to get better, and even I am curious when you look this is a reflection of who are buying and in combination with the snips that we sold and so you look at our portfolio coverage that surely the true indicator that who we have it our tenants now and we have been very selective with our picking tenants that are focused on getting ready to bundling that are focused on high acuity. You see our skill mix, our skill mix its must be the higher in the industry and so that it’s no different than what I have said before, you know there are operators that are well equipped to deal with the changes and there are operators that aren't and it's going to take them longer and some of them won't make it and the other factor for us is all of our acquisitions. We acquire smaller operators that are run by really sophisticated guys, guys that used to be with Genesis amount of care and the big guys and so you've got a real 18 in place and that’s been our focus and when you've only got three to five buildings, you’re really nimble. And so, so it's really just as simple as that. When you think about Genesis, I think they are doing all the right things, they’re just really big, there’s always been one company in the history in this space that’s bigger than Genesis and that would way back in the day and they had a downsize and that was a much simpler business than. So, they are big, so it just takes more time and we can go through other companies out there and I can give you some very specific reasons why certain companies are going through things that other companies aren’t as opposed to it being meaning sort of a sector phenomenon and because it just - because it isn’t the problems to you guys as I've said in the past is you just don't have enough data points. You've got a few publicly held post-acute and then every - the data have to come from us. So, I get the position you're in and it would definitely put you in a disadvantage from an analytical perspective. But we're not seeing these things at some of these larger companies are experiencing.

All right. Thanks for taking the questions.

We will take our next question from Tayo Okusanya from Jefferies.

Good afternoon, this is Austin [ph] on for Tayo. Hey, thanks for taking my call, just a few quick questions from me. So first, I just want to clarify that you said the acquisition pipeline is similar above $500 million for 2017 split half and half between skilled nursing?

Correct.

Okay, great. The second question deals more with Genesis and why they change their course regarding the proposed asset sales, did something changed any sense would be greater appreciated.

Well. the 21 facilities that they’re going to stay in now, the bulk of those are in one state and that state historically has one of the worst states in the country from a liability perspective and they saw what happened in that state in elections in November, it looks like there’s a need for meaningful form in that state and with meaningful form in that state that really changes the economics pretty dramatically in favor of the operating environment there because the facilities there were the floating that were losers. They are just facilities that actually did pretty well, but they were - had a target on their backs from the point this far, so that was a big driver I know for that one state. And the other states I think it was less material than [indiscernible] facilities and there just been some favorable changes in the climate there as well. So, one speak to them obviously, it says like a handbook, I'm just trying to feeling some of it, some of the gaps based on my conversations with Genesis and my understanding and knowledge of what’s happening in those states.

Okay. Great. Thank you for that. And then last question from me, so we’re thankful that you guys provided the certificate of occupancy timing to the development pipeline, but just from a modeling purposes, which of the two dates should we be looking at when determining, one that development will start to generate revenue?

Well, there’s a range of dates because there are multiple assets with in each of those categories so I hope that clarifies because I'm not sure I follow the question.

We should be, will be exercising the options and it’s a function of closing, right. So, it’s going to be - there is going to be some lag between exercising option at closing but not months.

And I think the point to keep in mind certificate of occupancy is something that’s easily estimable given that you can estimate a construction timeframe what’s difficult to estimate in some of these deals is the lease up period stabilization, which many of these are based on stabilization date versus a CVO date and the CVO date is designed to give you at least some sense of where those projects are but doesn't necessarily indicate the timing of exercising our options.

But I would say that however you model it, you're not going to be off by very much. So, that’s key because a lot of the options that we had to exercise are actually based on the stabilization dates and so to Harold's point while we maybe off a little bit of what those stabilization dates are, we’re not going to be off by months. So, the difference between the estimates really happened should be relatively immaterial.

All right, great. Thank you, guys. That’s it from me.

We’ll go now to Josh Raskin with Barclays.

Thanks. Hi, Rick, how are you? First question just on the $130 million of development I know you’re talking about you haven’t given formal guidance but you kind of run rate the $0.62 on an annual basis et cetera. The development I would assume would be additive to that in some reshape reform it’s just kind of coming in too late in the year to really have an impact and I guess juxtaposing opposing that is that maybe half of the offset to Genesis in terms of timing?

So, I think a couple of things, it’s clearly 2018 event it looks at hot summer package 2017 there won’t be material but certainly I'm sure in terms of reinvesting in Genesis proceed maybe half a long with we investment proceeds what we know we’re going to have a 130% pay or debt we always can carried on to the investment of proceeds so there’s certainly back staff in terms of how long it’s going to take us to actually reinvest.

Yeah, and I would add to that not only people talk about the timing of the assets sales and that’s obviously a portion of the reason why we run certainness to the impact for 2017 numbers, but the flip side or the additional piece to that is how long it takes to redeploy that capital, because if we get out of these assets by third quarter survey by the end of the first quarter we’ll have more visibility on acquisitions that we’re looking to close or maybe have closed, so we’ll get more clarity on redeployment of that capital. But that’s really the biggest difficult part of putting on guidance right now is the redeployment of capital less all the timing of the sales.

Right. But again, it sounds like you guys potentially have that covered.

Yeah, it just a matter of when will it happen.

And actually, in our case it's more than half of the coverage.

Yeah, I guess it's about to retire. So, the second question just broadly in the sniff market, you've got - and your Blocker Genesis other Blocker Genesis there seems to be some big buckets of sniffs in the market and I don't know if that makes it a buyers' market. Is that impacting the way you see cap rates I think you guys seem pretty confident you'll get this done by third quarter. But how are you thinking about proceeds and I know you get the 2 to 220. Is that should we be thinking about the lower end now or do you really think these are very market specific and there is plenty of buyers to absorb all of these potential sales.

There is plenty of buyers. We here is really how to think about it, because I know it sounds like a lot because you’ve got the portfolio that you noted it is our goal to living out there. Go-to-living is about 75% done on selling those refunds [ph]. And those are fine assets either. So here is the way to think about it. Think about 15,000 facilities over 50 states and we spread these portfolios that are out there over a bunch of markets which really drop in the bucket on a market specific basis. So, every facility that we're involved in marketing we're seeing tremendous amount of competition. So, we haven't seen cap rates expansion but we are seeing we're also not seeing cap rate compression. Prices are pretty much where they've been. And that's what our estimates our estimates are based on. So, it's really robust out there. As I kind of noted before there is always a huge difference not more than ever I think between the private market and the public market. And the private market these are operators they're strategic buyers, they are finance sources that are used to being in the space and aligned with the operators that they feel good about. So, there is a much different perspective on some of the positive outlook. On the snip space, particularly when you think about most of these guys are smaller operators, they're incrementally adding a couple of buildings in their portfolio, so it's a nice add on to them. They've got the infrastructure to handle it and making it upside kind of some of those assets because number of those assets. And all of those portfolios have under managed. I mean that's really their point of view.

Got it. And just one where you pick my interest in your prepared comments around if there is a refill bill meant if there is sort of replacement that long-term care would get carved out in the replacement. I'm curious under the [indiscernible] block grants for Medicaid. Is there I'm just curious if it's an easy answer if not, we can take it offline.

No, we can take it. So, that's always important dialog even in the past couple of time when it has to happen. There are couple of specific reasons, one Medicaid was designed to address the needs of the blind, elderly and disabled. All the growth or the majority of the growth in Medicaid expenditure is has been all the expansion of our public community services. And so, it's not long-term care that's been driving the growth in Medicaid so that's part of the answer. The other part of the answer is access. There is a growing pull of eligible beneficiary that are going to need skilled that we all know kind of what those numbers are. And there is a declining pull of facilities and beds available to take them in. And it's LDC were not to be carved out and if you were to assume, I think this is a reasonable assumption that at the end of the year 10, the states are dealing with 30% less Medicaid and they have budget, and they had before. The new cardiac services and you're basically going to have people on the street. So, that access issue has always been a critical issue and it's been exacerbated by the fact that there is less and less product out there and the demand is going to get greater and greater. So, that that’s really the single biggest driver. The other point I'd make in terms of home and community services when a lot of these programs first started taking off you know when I saw there is an operator in all the states that we operated in. There was a flawed assumption on the part of policymakers that by expanding home and community based services. They basically save the money by having reduced occupancy and therefore expenditures and skilled nursing facility that never happened, because acuity even on the Medicaid population and skilled nursing facilities has continued to increase. So, home and community based services simply can't take care of those people. So, it's happened from a budgeted perspective at the state level, as you’ve got the state Medicaid nursing home expenditures which haven’t gone down, it gone up, but now you got the total of a piece of expenditure that didn't exist before because your assumption was flaw to begin with.

Okay.

The operative as a brand new [indiscernible] assumption the path you make stand after it was.

Okay. Okay all right that's helpful. Thank you.

Yeah.

[Operator Instructions] We'll take our next question from Paul Morgan with Canaccord.

Hi, good morning.

Good morning.

Just going back to Genesis. Rick, you said you had a buyer pool lined up is that kind of the new buyer pool based on kind of the changes in what Genesis decided to do or that kind of where you were before?

We're lining up to new buyer pool now, so the even though we switch to [indiscernible] the real estate, we've got pretty response is the just way earlier in the process that we're working for.

Right, okay and then now I guess with the changing in the timing, it would seem like even the size, what's going on in your pipeline at this point in the year, you could end up sort of with less dilution than you anticipate it even though wasn’t your necessary your intention, how would you think about funding kind of first half for the year, investments and come up in light of the anticipated proceeds that you will get in the third quarter, it stuff you kind of finance short term on the line and so would be sort of short term even more accretive or would you think about it differently?

Yeah, now that's exactly how we would think about it. I mean we're going to - we've got plenty of liquidity on the revolver, we'll use that revolver or we'll use the cash that comes in, as that cash comes in and if we spend money on the revolver and the cash comes in, then we'll use those proceeds to pay the revolver back down.

Okay. Great. And then just lastly on the pipeline could you characterize maybe, what the mix is between kind of organic growth what's your existing operators versus new relationships?

It's all new relationships. I shouldn’t say all, it's I call it 80% new relationships.

Is that reflection of kind of new operators aren’t looking for the same amount of growth or just there is a lot of new stuff coming?

It's a combination of both one we think that we've come to see is that our operators was apparently [indiscernible] us they would have grown really slowly, they're very focused on both on the skilled side and the senior housing side activities going up, there are new models that are being implemented and they're have their main facilities to begin with, so they're not, they don't want us to bring on five buildings, they want to bring building at a time. So, organically, we're not going to grow with our existing tenant phase at the pace that maybe we originally thought we might and I'm actually not even being critical of our guide because in a dynamic environment the fact they're being cautious and making sure they’ve got everything together before they want next building, I think it's one of the reasons that you see the results and you see our portfolio. So, I appreciate that, but it caused us to, it also focused on adding additional relationships, so it's really a combination of the two.

Okay. Great, that's helpful. Thanks.

[Operator Instructions] We'll go next to Eric Fleming of SunTrust.

Harold, couple of quick number of questions, I missed. Harold what did you say, you said the net proceeds for advance the sale, what was that number, you said after debt?

Be between $185 million and $205 million and the difference obviously is there some high debt that goes with one or two of those assets. So, that's part of the gross proceeds.

And then another question on, you just talk about the overhead expenses, so you're saying kind of run rate going forward, you're talking about kind of a $3 million number plus dot com effectively?

Yes. That's right. Plus, dot com which is always difficult to predict, it's tied to our share price, and then there would still be some residual acquisition pursuit cost that get expensed, but it will be much less than it has been in the past.

Okay. So, just rough numbers what it looks like, your G&A line comes in flat to down from 2016?

Well, I think it's going to be well yeah it will be down because of the capitalization of acquisition pursuit cost, that's correct. So, if you take, if you took our historical stock comp that's going to be - it kind of fluctuates quarter-to-quarter, but it will be somewhere in that same range on an annualized basis and then you take the $3 million kind of run-rate per quarter of our cash corporate G&A. And then some small amount for transaction cost typically historically right around 600,000 a quarter I would say and probably be maybe a third of that going forward plus or minus and that going to give you full picture.

And Eric, also I just want to make sure that messaging is clear on Genesis and that is we are going to continue to be aggressive on possessing assets once we started [indiscernible] once we actually see that they are going to be closing, we'll be mindful of balancing our growth with that, but for us that we just address that exposure even more aggressive we have in the past.

Okay. And, just one last one in terms of development pipeline you have this occupancy timeframe you guys have kind of general timeframe in terms of specific occupancy to stabilize is that like six months to 18 months, is going to give a range?

Eric, it's Talya. It really varies and primarily varies with the type of facility and the size of the facility, so no surprise, a small facility would have a shorter rump up period and a much larger facility would have a much longer ramp up period. I think if you think about 20 - CVO stabilization that's a good rule of thumb and give sort of a plus minus around that.

Okay. Thanks a lot.

And I would like to turn the conference back to Mr. Rick Matros for any additional or closing remarks.

Thanks for your time today. We are all available to you for additional follow-up. And so, have a great day and we look forward to talking to you. Thanks.