Good day, ladies and gentlemen, and welcome to the Sabra HealthCare REIT Fourth Quarter 2017 Earnings Conference Call. This call is being recorded. I would now like to turn the call over to Michael Costa, EVP Finance. Please go ahead, Mr. Costa.

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, disposition and investment plans and our portfolio repositioning with certain legacy CCP tenants, our expectations regarding our future financial position and 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, 2017 that was filed with the SEC yesterday 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 explanation and reconciliation of these measures to the comparable GAAP results included on the financials page of the Investors section of our website at www.sabrahealth.com. Our Form 10-K and earnings release can also be accessed in the Investors section of our website. And with that, let me turn the call over to Rick Matros, Chairman and CEO of Sabra HealthCare REIT.

Thanks, Mike. And thanks everybody for joining us today. I'll go through my comments and then I'll turn the call over to Harold Andrews our CFO and after that we'll go to Q&A. So again, thanks for joining us we had an extremely productive quarter. We've executed our all initiatives following the CCP, Enlivant and North American transactions as we said we would. We concluded the integration of the merger well ahead of schedule, we've now finalized our portfolio restructuring analysis lowering our worst case annual rent reduction from $33.5 million to $31.2 million with a new best case of $28.2 million. Our performance skilled nursing EBITDAR rent coverage will be between 1.38 and 1.40 all consistent with what we've been articulating. We completed the sale of 22 Genesis facilities and then execute LOIs on 76% of the remaining Genesis assets we intend to divest and I would remind everybody that we just started marketing at the very end of the year. So, we've gotten really fantastic response for the prices that we anticipated and how we are getting stacked with more detail. With these and other asset and process our skilled nursing exposure would be reduced to 63% proforma from 74%. And I want to take a minute here to reiterate some of our long-term goals and look when we did the CCP merger we knew we'd get some push back on the increase in skilled exposure and we heard comments out there that we sort of did this about, so we never did in that phase. Our long-stated goals have been from the day we did the spin to get to investment grade to diversify our incentive base and to increase our active diversification so we have more balance during skilled nursing and senior housing and potentially other…

Thanks Rick. Thanks everybody for joining the call today. I'll walk through the financial highlights from the quarter and let's spend a couple of minutes providing an update on the CCP portfolio repositioning, the Genesis asset sales, our 2018 outlook and then make a couple of quick comments on the recent Genesis press release. For the three months ended December 31, 2017, we recorded revenues and NOI of $166.5 million and $160.5 million respectively compared to $61.8 million and $60.3 million for the fourth quarter 2016. These increases are due predominately to revenues and NOI generated from the properties acquired in the CCP merger. On a same store basis, cash NOI increased from $46 million to $47.7 million an increase of 3.7%. FFO for the quarter was $106.8 million and on a normalized basis, after the exclusion of $1.6 million of CCP merger and transition related costs and $9.3 million charge against provision for doubtful accounts and loan losses was $117.9 million or $0.66 per share. This normalized FFO compares to $40.6 million or $0.62 per share of normalized FFO for the fourth quarter of 2016 a per share increase of 6.5%. AFFO which excludes from FFO expense merger and acquisition costs in certain non-cash revenues and expenses was $106.6 million and on a normalized basis after the exclusion of $0.7 million of CCP related transition costs and $0.4 million attributed to the recovery of previously reserve cash income was $107.1 million or $0.60 per share. This compares to normalized AFFO of $35.7 million or $0.54 per share in the fourth quarter of 2016, a per share increase of 11.1%. For the quarter, we recorded net income attributable to common stockholders of $101.4 million compared to $20.6 million for the fourth quarter of 2016. Our G&A cost for the quarter…

[Operator Instructions] Our first question comes on the line of Smedes Rose of Citi. Your line is open.

Hi Smedes.

Hi. How are you.

Very good.

Lots of moving pieces in your outlook and lots of detail there. But I just wanted to ask a couple of kind of overview questions. On page 15 of your supplement where you provide the EBITDAR coverage by segment proforma. So, to ask what percent of your portfolio or I guess the company-wide EBITDAR is covered by those coverage metrics, I know some of them you don't include if there is a corporate guarantee attached?

Yes, so the way I like to think about and this will answer your question and we can get you the exact number. But if you look at our top 10 portfolio that's covering about over 60, about 62% of our NOI in the top 10. There is a handful of those in the top 10 that are also included in those coverage numbers. So, we'll get you the specific number of what's included but it's probably 70% or so. And the other thing I want to point out this is a question that I get a lot, how much of our NOI is non-stabilized and are non-stabilized is only about 8% of our NOI and covers again, we define stabilized assets that are actually being transitioned to new operators or new acquisitions that we have. So, we'll get you that Smedes in a second the specific number, but we do disclose about 65% on a specific asset-by-asset basis.

Okay. And then I think you said, you guys are looking at about a pipeline around $850 million on the senior housing side. So, is that primarily, in the triple-net side of the business are you looking at RIDEA, more RIDEA assets or will Enlivant be kind of your only venture there?

So, it's primarily triple-net. Our view on RIDEA as everybody I think knows has never been a strategy bars to pursue RIDEA as an operator but the key there really is if we're looking at an asset to acquire on a RIDEA basis, it's got to be in early stage where there's a lot of runway ahead of it. So, if you think of that when most of the larger RIDEA deals were done, they were done sort of in the 2012, 2013, time period when senior housing occupancy was really ramping up and even through shop relative slowed for some of our peers if you look at the returns from inception, it's actually been quite good. So that case of Enlivant because they are close to the performance yet, there was an opportunity to ride it. So, another way to put it in, we would not look at acquiring a stable portfolio on a RIDEA basis. It's got to have it.

Okay. Thank you.

Thank you. Our next question comes from the line of Juan Sanabria of Bank of America. Your line is open.

Hi Juan.

Hi, good morning. Just a question I guess I apologize Harold if you went through this in your very detailed commentary. But is the 28 to 31 in rent cuts that you now feel comfortable with. What if anything was flowing through the fourth quarter in which the timing of when that gets effectuated is with regards to your 2018 guidance?

Yes. So, we did have some flow in the fourth quarter for a couple of tenants. On an annualized basis, that would be up a little over $22 million. And so, the rest the remaining difference between $28 million and $22 million about $6 million bucks is going to be flowing through effectively January 1. So, the full $28.2 million will be fully baked in, but $22.2 million was baked in the fourth quarter already.

Okay. And then with regards to the Genesis sales that happened in the fourth quarter on the 22 assets. What was the NOI that flowed through in the fourth quarter or however you want to describe it to get a kind of a clean run rate as to think about the numbers for the first quarter for those just those 22 assets?

I have to take a look at that, I don't have it on top of my head. Want to look at that for you shortly. The way about going into 2018 is we've got the 54 assets that are representing the $52 million of revenue so that's your best starting point for where we started January and then those assets will start to be sold with a $10.4 million plus the $5.3 million of residual rent continuing for the full year.

Okay. And then I notice you guys published an NAV kind of the building blocks there. How are you guys feeling about kind of where you are trading relative to how you see private market values and any thought about looking at a buyback instead of pursuing the seniors housing acquisitions which I had assumed would kind of be [ph] type cap rates or any thoughts there?

Yes, when I say that we've got so much coming in proceeds we don't have this worry about where stock is right now, but look it's in no rational universe should we be trading at close to distress levels which is where we are. Just makes no sense, so hopefully as the story continues to unfold and despite all the questions or concerns about the ability to integrate and execute I think we're amply demonstrating that we have no issues there. We have tremendous capacity here you do that. So in terms of a buyback specifically, we have looked at that we got to pull it out as we discussed it with our board and the amount of [ph] you get by doing a buyback is pretty negligible and we just serve to increase our leverage and we're really mindful of being investment grade now and staying there and everything that we've done over the past six months or so as we transform the company has always been previewed with the agencies, so that we were comfortable that we weren't doing anything to get really in jeopardy and I think everybody saw with Fitch and S&P that they put out notes at the end of 2017 and early 2008 affirming their outlook and be ready to begin. So, obviously no one knows where this market is going to go in terms of the equity side, but we should perform better at least on a relative basis given the current discount that we're trading and certainly some of the guys that cover us have been working that out and we appreciate everybody is working that out, but we appreciate with the support that we're getting.

Thank you.

Thank our next question comes from the line of Michael Knott of Green Street Advisor. Your line is open.

Hi, this is Andrew filling in for Michael Knott. Looking at the senior housing operating it seems like 18 is going to be a tough year as some of your peers are guiding to negative growth. But with Enlivant being in slight different markets can you talk a little bit about what's your forecasting for this year and your assumptions on the changes for the occupancy?

Well for Enlivant, as I noted they are at a different spot. I think others maybe forecasting like growth or negative growth because they really maxed out some time ago and maybe we are in the slow to mid-90 percentile and that's not the case with Enlivant. So, we haven't put out a specific forecast for Enlivant nor will we. But suffices to say that we don't expect any negative growth, we continue to see that. We continue to expect that portfolio to ramp up.

And for the bond issuance, it has been pushed out from '17 to '18. Can you talk about what has changed an what's your target pricing is?

Well, I think what changed is a couple of things. One, we have a peer in our group that is a strong comp for us and they were trading wider which affected us and so we have, there is no rush for us. We don't have to do this now, we don't even have to do it this year. So rather than go out and do, and take out the old notes with new notes where there was more risk involved, we believe that we're better off outstanding PAT and waiting for spreads to tighten up a little bit and also give us the opportunities. We continue to execute and continue to decrease our exposures filled nursing that comp will no longer be as effective as it is now which will accrue to our benefit.

Okay. Thank you.

Thank you. Our next question comes from Rich Anderson of Mizuho Securities. Your line is open.

Thanks. Good morning out there. Are there any more changes, I know you changed the sort of the worst-case scenario rent reduction CCP but are there any changes about you get there because there are going to be more asset sales or anything like that or is it basically all rent release?

There is no change in the assumptions. Now that we've had some of those operators under our umbrella for a longer period of time, we've done really deep dives. Bill Mathies has joined us to do some work on the portfolios, so we've done pretty intricate operational assessment and as you know Rich given our operational background certainly mine and some of our asset managers and certainly Bill's it's beneficial to us. So, it really just is a function of understanding where we are at looking at their business plans, watching their trends, watching how they start to execute their response to us in terms of the feedback that we've given them which they have been really open minded about. So, it's really just those kinds of things that led to the reduction in the assumption.

Yes, Rich just to add to that. I just want to remind you and everybody that we did anticipate some assets sales as part of that process. In my commentary, you heard me speak about 10 assets that we are selling, we're not basically staying flat where we originally expected and we will see some weight go away from that then we'll be replaced, but all consistent with what we had previously.

Okay. Yes, that 58. I dint connect the dots that was CCP stuff. All right. Rick, HCN is becoming more dovish on their process with Genesis, you guys are continuing on basically selling almost everything not to speak for their strategy but why you wouldn't you maybe still own more than eight assets given the lifeline that they're getting and all the rest and the potential that ultimately that this could all work out for them longer term. Have you given any thought doing that a little more than?

Yes. So, without commenting on anybody else's strategy because it's not correct to do so. I would say that it's great that they've gotten the release that they've gotten. All that's done is put them in a better position to hopefully completely restructure the company, the company has to be restructured. The current business model does not work. You can't run a company with 500 buildings or 450 buildings in this environment. In fact, you could never run a company that size in the skill nursing space ever even in a much simpler time. So, from our perspective they simply can't compete with the kinds of operators that we have in our portfolio and so maybe six months from now. And look, I know they were addressing sort of the next step, it's possible. As Harold mentioned we have 11 assets that aren't under contract yet, and if they come out several months now and announce some additional restructuring that we think will make them more effective operator and fit the profile of the operators that we want to align ourselves with. Then maybe we'll think about keeping some of those that currently are under contract but that would only increase our exposure from 2% to 4.5%. So, we still prefer smaller operators, we drove operators that are much more numeral on the ground then they are and I want to stress, we think they are good operators. We think they are good guys, we just think too much and again that's really tough. When you are an operator and the other point I would make and I think this is important. Obviously, Brookdale made their announcements so they are going to be around for a while, I pray that they are out of their public stock [ph]. Medicare probably won't be visible at some point, and we'll see what happens with Genesis. But I think that in terms of when you all look at the space more and more, it's going to be the reset really represents the space. When you look at the number first tenants that we all have, we represent the space. And so, I think it's incumbent upon us, we have a responsibility to make sure that we are aligned with the best operators so that you've got a much better and broader perspective and it isn't going to be 10 mines and a few operators or maybe some water operated that really don't represent the business any longer and that sort of drives sentiment about the industry. And we take that and I want to settle for the high flying here and all that, but actually take that responsibility really seriously and when you when you look at our top 10 and you look at our percentage on statewide assets that's a pretty good place to be that we've gotten through relatively quickly to close the CCP deal.

Okay. And did you give any thought to as long as you are going through the process of CCP and running around the country reviewing and evaluating to do the same with senior care just to address that in the quick fashion that you often do or why wait it out a little bit with them?

It's a good question and I have quoted in my initial remarks, they are obviously the one operator that stands out that doesn't have strong coverage. Our analysis of that portfolio is that unlike some other operators that are doing pretty good job and they just have certain headwinds in their markets whether it sounds like that they are wages or whatever and the case is senior care because it had so much turnover in management there. So, it's a ton of low hanging fruit there that should be relatively easy sixes. They board a new COO and who we know we brought him into the office and went through everything in detail with him. I have Bill Mathies send one out to their corporate office in Texas and ran through everything that they were doing and so at this point, we think that we can wait a little while. We're not going to wait two years or probably even a year. But we are going to wait a little while to see if they progress the way we think that they can progress. And if they can great. And there are other solutions out there that we are prepared to take.

Last question, do you think you in the next year or two you could fly past below the 57% skilled nursing exposure you had prior to CCP or where is your happy resting ground on that break out of the 50:50?

Yes. I know, we want to get closer to 50:50 but in terms of getting that we're only 6% above it right now. So, we're down from 17% to 6% in months, so I don't think it's not going to take us two years and so I would expect that we're going to be pretty close by year end this year.

Okay. Thanks very much.

Thank you. Our next question comes from the line of Chad Vanacore with Stifel. Your line is open.

Thanks. I might have missed this one. On your rent cut that you previously outlined, it looks like you are better than expected by $3 million to $5 million. So what factors were in the improved expectations. And then, you said something in the prepared remarks about having $3 million left to allocate?

Yes, so we gave ourselves some cush there in case we wanted to us a little bit more but basically, it's really what I just said in the previous questions; and that is, we've had those operators in our portfolio for a longer period of time, now we've got really deep dives operationally, we've brought additional expertise into the management team to spend time with those operators. And so as we've spent more time and got to know them better and trying to executing on certain components of their business plan and lock some of the trends, we've felt really comfortable that we didn't need to do quite as much as we did before, and we don't want anyone to ever be concerned about another shift dropping and that's why we're giving ourselves some cush with the other three.

Just to add to that really quick; if you remember going back when we came up from the $33.5 million, it was a pretty high level analysis before we did a deep dive that Rick's talking about and it was really based on getting the tenancy of below one time's coverage upto 1.1 plus getting Signature upto 1.3. And so as Rick says, we've done the deeper dive. Some of those tenants are below that 1.1 threshold but we're comfortable with where they are at and there is a couple that we're going to wait and see what happens with them. And there is also a tenant that's -- shorter term tenant, the lease expires here at the end of the year, so there is no reason to give a rent cut for alternative expiring, we'll deal with that when that time comes.

And Harold, are we seeing all those rent cuts in the first quarter or use some roll in through the year?

Again, about $22.2 million on an annualized basis were already reflected in our fourth quarter numbers and then a full $28.2 million you can expect to be in the numbers effective January 1. And then any additional amounts of that $3 million we talked about -- we haven't made any decision, if at all, we will even use that.

I remember in the last quarter, we saw net bookings of certain tenants on a cash basis like Signature.

On your pipeline, it looks like you're looking to invest $120 million in 2018; how should we expect these cash flows for investments to come in through 2018 and 2019?

So the investment that we're talking about is primarily assets that are currently in our preferred equity portfolio or loan portfolio, stabilizing and thereby treasuring the purchase option to come into our real estate portfolio. And this spread pretty evenly throughout the year, it's not a big chunk but I'd say it's probably slightly backend loaded for 2018.

Our next question comes from the line of Daniel Bernstein of Capital One Securities. Your line is open.

Normally I don't say great job but I think you guys had good execution here. On the flipside, I'm going to play a little bit of Devil's Advocate and I agree with the demographics that everybody talks about but how do I reconcile potential occupancy increase versus some of the wage growth we see out there in SNFs and maybe seniors housing? And also the kind of limit on the market basket we've seen on Congress [ph]. When you talk to your SNF operators and you think about the outlook for the SNF industry for the next couple of years; how are you thinking about that occupancy versus expense growth?

I think that there are couple of things. Our skilled operators are actually pretty comfortable as they look out over the next couple of years. I think on the demographic piece, as -- and one of our peers on their earnings call talked about in detail that they actually have infrastructure in place around this modelling, I think that they are -- the basis they are modeling is really good, we don't have an infrastructure, we access information from the trade association which has good data points and some other third-party vendors that do really good job of projections. And so we agree that we'll start to see sort of 75 plus crowd, some increase in occupancy starting at some point in 2019 and there is no big wave coming in as we all know, it's just going to start trickling in but here are the way to think about it. If the industry is at 81% or 82% occupancy and you've got on average 100-bed buildings, getting one or two more patients then your cost are fixed. Go back straight to the bottom-line, it provides pretty strong relief, relatively quickly. So when you think about the wage issue, the thing about the wage issues is, they happen to nearly change very much, there have been wage issues for the entire time I've been in the business because there has been a nursing shortage and a therapy shortage for the last 35 years. And the issue really is that, with length of stays coming down and therefore occupancy coming down, the impact of that wage pressure becomes disproportionate. So the way we think about it is, if we -- if you want to add a couple of percentage points to your occupancy knowing that there are no cost associated to…

No, I mean -- you know the industry really well, so whenever I open up Pandora's Box it gives you the floor. Actually there is one real quick question to it, just real added to that; I mean you don't have that much construction in your portfolio -- and really the sizing of your portfolio and it seems like there is, if the industry is going to be more towards complex care there needs to be a lot of CapEx put into some of the buildings where you have a new construction come into the SNF's base. Do you see any opportunities or are you working on any opportunities to put some more CapEx into your operators and maybe do some more development?

I don't see much in the way skilled nursing development. In Texas there is quite a bit because you can do whatever you want in Texas for less money and without regulations. But that's not that much of an exaggeration actually but outside of Texas, it's so regulated, it's so expensive. I had a conversation with someone yesterday who is actually opening up a new skilled nursing facility in California which is almost unheard off but it took them four years to get through the regulatory process. So, we -- just to extent and just in terms of work, and I think that's going to accrue to the benefit of the operators to get it right. So in terms of CapEx investments on our existing portfolio, as operators were to modernize -- they know that we will do that as soon as they feel like they wanted to make the call and we have ongoing dialogues with them about that through our asset management team, so they haven't brought it out to us, we may actually may bring it up to them and say they think it's time that you start thinking about maybe do a little bit more modernization that you've done -- whatever that can tell, so it's possible that we'll have more opportunity there but it's going to be on modernization of existing assets and not on development of new skilled nursing assets.

Our next question comes from the line of Mateo Akusania [ph] of Jefferies. Your line is open.

Questions from my end; the first one is Signature. So you have dealt with the rent concession there but I mean they are still going through a bigger restructuring at this point; just curious what's kind of going on with the broader restructuring? And whether they can get all their parties together at the same way Genesis is trying to give them a sort of -- at kind of making it through the tough times?

Sure. So exactly, to meet now [ph] because those negotiations are ongoing. We already have an agreement in place, so it's us, it's Omega, it's a group called Harbor [ph] which provided the equity sponsor for Signature, they have about -- I think 6 facilities they hold leases on; so it's primarily us and Omega and then the lender on the line is CAP1 who has been very cooperative working with us as well. We already have an agreement that's potentially in place, we're just waiting to see if the med-mail [ph] guys are going to continue to be reasonable in the negotiations and if they are then I don't think we're that far from getting this done, we'll have to go through DK. So there is no issues with us and major constituents; so that actually came together pretty easily.

But what is they are not willing to negotiate and you do have to go through the DK process; does that change anything about how we should be thinking about the overall impact of the Signature restructuring or Signature bankruptcy?

It won't change anything except that the bankruptcy will add a cost but those guys will get crushed. So that won't change anything in terms of what we have been recording or what we anticipate going forward and I might feel comfortable saying that, that -- I don't want to make any comments about any of our other peers; I think our peer in this case would feel comfortable saying the same thing.

And then the second thing; the residuals, the $5.2 million for the next 4.28 years, would you just remind us again how that works again?

Sure, no problem. The deal we struck with Genesis is, we gave them the $19 million rent cut, it set all those properties that are 1.3 cover at 4% management fee. We knew in our pre-marketing analysis that that was probably tighter covers than more buyers were going to be willing to accept. So when we agreed to give Genesis a $19 million rent cut, in addition to just getting their cooperation to sell assets we also put into the agreement that we will give them a rent reduction from those assets sales based on whatever the other -- they are going to have to pay the new landlord. So in this case, rents were cut and set at 1.4 coverage; so these new landlords are demanding less rent on these leases with Genesis and that dealt between the rent that they are paying us and what they are going to be paying the new landlord, that's what they have to pay us for the next 4.28 years. As I said, the once that are under contract, it's about $5.2 million and these are additional $3 million to $4 million we expect upon selling the rest of the portfolio.

Rick, back to the comment you made earlier on; you talked about pushing the bond deal because again, one of the comps you had up there was a SNF that was trading very wide from a credit perspective. And you thought your world would change this year with a lot of the senior housing assets you kind of had in the acquisition pipeline. Over the past 2-3 years, you've kind of gone back and forth and be coming skilled nursing heavy and then not skilled nursing heavy; and it kind of seems to go back and forth and I think it creates some confusion sometimes about exactly what Sabra wants to look like or be on a long-term basis. So I guess, the question I have is; are you -- do you still consider yourself mainly a skilled nursing business? Do you want to become more of the half and halves like the LTCs and NHIs of the world? What's the vision of what really Sabra wants to look like over the next 3 to 5 years?

It is more balanced and I would say this, prior to the CCT deal we really didn't go back and forth, we're on a steady -- in terms of steady state reduction and reversing [ph] an increase in senior housing. Maybe we do the occasion of skilled nursing deal, it was a good deal but it really wasn't very much; if you look at the trajectory from 2012 when we first started gaining the senior housing through the spring of last year. And so in the case of CCT there was very specific opportunity that gave us some different strategic benefits as you know which included getting to investment grades and not having one tenant that can put -- drove the narrative of our entire company. And for us achieving those two things which had also been long stated goals has worked the increase -- it's down to the exposure because we were confident that we're going to be able to get that exposure down relatively quickly which we certainly have been doing. We also felt that the new size of the company, that the improved credit of the company improved, and the facility of the company would allow us to be more competitive on senior housing than we had been and as we noted, without doing that deal we would never have gotten the deal done with GPG [ph] and in light it would not happen. So for us, there is always a one instant in time where we sort of gearing a little bit off of our trajectory and having a more balanced portfolio, and that was because of the strategic benefit that we got from doing that merger. And I would tell you that if we had any doubt that we would be able to continue to diversify our asset class, that would have given us, that can tell us about the merger but we are that confident that we would be able to continue on that path. I mean those are the kinds of decisions you have to make, right, and again -- look, we've prove it.

Our next question comes from the line of Eric Fleming of SunTrust. Your line is open.

I can follow with you offline, it's not that important.

Our next question comes from the line of Todd [ph] with Wells Fargo. Your line is open.

The lease coverage on Signature, I don't know if I missed this early in the call, it was sub 1x last quarter, now it's over 1.2x; any color there? And does this upward move get in the way of your restructuring at all?

It's actually a result of the restructuring, those are pro forma coverage which represents the rent adjustments that we're giving them. So they are still performing very strongly like they had been previously, there is no deterioration in their performance. It's been pretty steady state and they are paying their rent based on the adjusted rents that were provided to them, and so to show you once that's done we are going to be covering. On a historical performance basis, it's 1.26x; when you look forward to projections for 2018 we would expect it to pick up closer to the 1.3x area.

[Operator Instructions] Our next question comes from the line of Jonathan Hughes of Raymond James. Your line is open.

Rick, you mentioned the private equity is kind of out of the SNF acquisition market except for the one fund you're working with on the Genesis sales. Are there strategic buyers out there or any other REITs looking to fund expansions for their operators? I'm just trying to understand how deep the buyer pool is for the remaining [indiscernible].

The buyer pool really is deep and it was never a huge influx positive equity interest on the skill side. I mean if you consider formation on the private equity side, they've always benefited [ph] but outside the formation it hasn't been. And our experience is in with the foreign buyers that you could have really subset of conversations and you think you can get close but it doesn't necessarily happen. So the buyer pool is really -- there are operators on the ground, there are strategic buyers, there are finance sources that have been in and around the business that understand it, that see some of the upside that I outlined earlier and then really willing to make commitments. What's been interesting and a little bit different than we've seen before and we've seen this with the Genesis assets; we're seeing buyers out there who normally would like to operate that are willing to buy the real estate only and if that particular asset they are buying, if the operator is running it happens to fail then they totally [indiscernible] we get off for free or close to it. So that's been sort of interesting to watch but it's -- I mean, if you think about -- we just started marketing this, I mean literally a little bit over a month ago and we have 76% of the assets under LOI [ph]. So it's pretty robust out there and the other way to think about it is, you can't think about sort of all those having all these assets out there in the market because when you look at it on a market specific basis over 50 states, it's really not that much on the market, and any given market. So in terms of the results, I think every one of our peers is willing to invest in their skilled operators and put CapEx into kind of whatever is necessary to grow that and I know that all of the operators that are aligned with all of us out there know that to be a factor, it's one of the advantages that we have and trying to get deals that as they know that we are sort of trying to capital partners that they can always count on.

I know it's still early in the legislative and rate setting process, but we've heard that New York and California may try to call back some of the tax reform benefit on the Medicaid managed care side. Do you see that as a longer term risk to your SNFs? Are they outlook for investments in those states?

We'll see how it plays out but one, our operators don't tune much any Medicaid managed care which is not happening in the skill setting. I don't even think it's -- we may not have any revenue from Medicaid managed care in our SNF operators, if it is, it's not even rounding and we see no trends there within the SNF population. So I'm not really concerned about it in those two states if it were to happen. But I also think that anytime they try to do something legislatively, the trade associations usually have really strong lobbying effort and really strong graphics to go along with that lobbying effort that tends to keep people in check. The politicians pay to be as in their districts with DMR [ph] being pushed over a cliff and those ads will get pulled out all over again.

Thank you. At this time I'd like to turn the call back over to Rick for any closing remarks.

Thanks very much. Thanks all for your time today. I know the call went a bit long but as everybody noted, we have a lot of things going on but I hope you all at least have a comfort level that -- and what may look to you like a lot of moving pieces and a lot to execute, for us it's just another day. So anyway, Harold and I are always available and look forward to talking to you on a go-forward basis, it's conference season, so we'll be seeing a lot of you at the conferences coming up. Thanks very much, have a great day.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day.