SUMMARIZED CONDENSED CONSOLIDATING INFORMATION | UMMARIZED CONDENSED CONSOLIDATING INFORMATION In connection with the offerings of the Senior Notes by the Issuers, the Company and certain 100% owned subsidiaries of the Company (the “Guarantors”) have, jointly and severally, fully and unconditionally guaranteed the Senior Notes, subject to release under certain customary circumstances as described below. These guarantees are subordinated to all existing and future senior debt and senior guarantees of the Guarantors and are unsecured. The Company conducts all of its business through and derives virtually all of its income from its subsidiaries. Therefore, the Company’s ability to make required payments with respect to its indebtedness (including the Senior Notes) and other obligations depends on the financial results and condition of its subsidiaries and its ability to receive funds from its subsidiaries. A Guarantor will be automatically and unconditionally released from its obligations under the guarantees with respect to the Senior Notes in the event of: • Any sale of the subsidiary Guarantor or of all or substantially all of its assets; • A merger or consolidation of a subsidiary Guarantor with an issuer of the Senior Notes or another Guarantor, provided that the surviving entity remains a Guarantor; • A subsidiary Guarantor is declared “unrestricted” for covenant purposes under the Senior Notes Indentures; • The requirements for legal defeasance or covenant defeasance or to discharge the Senior Notes Indentures have been satisfied; • A liquidation or dissolution, to the extent permitted under the Senior Notes Indentures, of a subsidiary Guarantor; and • The release or discharge of the guaranty that resulted in the creation of the subsidiary guaranty, except a discharge or release by or as a result of payment under such guaranty. Pursuant to Rule 3-10 of Regulation S-X, the following summarized condensed consolidating information is provided for the Company (the “Parent Company”), the Issuers, the Guarantors, and the Company’s non-Guarantor subsidiaries with respect to the Senior Notes. This summarized financial information has been prepared from the books and records maintained by the Company, the Issuers, the Guarantors and the non-Guarantor subsidiaries. The summarized financial information may not necessarily be indicative of the results of operations or financial position had the Issuers, the Guarantors or non-Guarantor subsidiaries operated as independent entities. Sabra’s investments in its consolidated subsidiaries are presented based upon Sabra's proportionate share of each subsidiary's net assets. The Guarantor subsidiaries’ investments in the non-Guarantor subsidiaries and non-Guarantor subsidiaries’ investments in Guarantor subsidiaries are presented under the equity method of accounting. Intercompany activities between subsidiaries and the Parent Company are presented within operating activities on the condensed consolidating statement of cash flows. Condensed consolidating financial statements for the Company and its subsidiaries, including the Parent Company only, the Issuers, the combined Guarantor subsidiaries and the combined non-Guarantor subsidiaries, are as follows: CONDENSED CONSOLIDATING BALANCE SHEET March 31, 2017 (in thousands) (unaudited) Parent Company Issuers Combined Guarantor Subsidiaries Combined Non- Guarantor Subsidiaries Elimination Consolidated Assets Real estate investments, net of accumulated depreciation $ 146 $ — $ 1,845,293 $ 148,153 $ — $ 1,993,592 Loans receivable and other investments, net (222 ) — 96,711 — — 96,489 Cash and cash equivalents 5,285 — 3,707 3,822 — 12,814 Restricted cash — — 67 9,084 — 9,151 Assets held for sale — — 2,073 — — 2,073 Prepaid expenses, deferred financing costs and other assets, net 2,556 17,106 97,831 10,403 (1,889 ) 126,007 Intercompany 345,081 664,771 — — (1,009,852 ) — Investment in subsidiaries 663,960 942,039 11,712 — (1,617,711 ) — Total assets $ 1,016,806 $ 1,623,916 $ 2,057,394 $ 171,462 $ (2,629,452 ) $ 2,240,126 Liabilities Mortgage notes, net $ — $ — $ — $ 159,905 $ — $ 159,905 Revolving credit facility — 17,000 — — — 17,000 Term loans, net — 243,711 92,881 — — 336,592 Senior unsecured notes, net — 688,879 — — — 688,879 Accounts payable and accrued liabilities 12,456 10,366 9,128 3,336 (1,889 ) 33,397 Intercompany — — 1,036,134 (26,282 ) (1,009,852 ) — Total liabilities 12,456 959,956 1,138,143 136,959 (1,011,741 ) 1,235,773 Total Sabra Health Care REIT, Inc. stockholders' equity 1,004,350 663,960 919,251 34,500 (1,617,711 ) 1,004,350 Noncontrolling interests — — — 3 — 3 Total equity 1,004,350 663,960 919,251 34,503 (1,617,711 ) 1,004,353 Total liabilities and equity $ 1,016,806 $ 1,623,916 $ 2,057,394 $ 171,462 $ (2,629,452 ) $ 2,240,126 CONDENSED CONSOLIDATING BALANCE SHEET December 31, 2016 (in thousands) (unaudited) Parent Company Issuers Combined Guarantor Subsidiaries Combined Non- Guarantor Subsidiaries Elimination Consolidated Assets Real estate investments, net of accumulated depreciation $ 150 $ — $ 1,860,850 $ 148,939 $ — $ 2,009,939 Loans receivable and other investments, net (410 ) — 96,446 — — 96,036 Cash and cash equivalents 18,168 — 2,675 4,820 — 25,663 Restricted cash — — 57 8,945 — 9,002 Prepaid expenses, deferred financing costs and other assets, net 2,859 18,023 96,301 10,005 (1,909 ) 125,279 Intercompany 368,281 687,493 — 25,125 (1,080,899 ) — Investment in subsidiaries 640,238 907,136 12,364 — (1,559,738 ) — Total assets $ 1,029,286 $ 1,612,652 $ 2,068,693 $ 197,834 $ (2,642,546 ) $ 2,265,919 Liabilities Mortgage notes, net $ — $ — $ — $ 160,752 $ — $ 160,752 Revolving credit facility — 26,000 — — — 26,000 Term loans, net — 243,626 92,047 — — 335,673 Senior unsecured notes, net — 688,246 — — — 688,246 Accounts payable and accrued liabilities 13,712 14,542 11,606 1,688 (1,909 ) 39,639 Intercompany — — 1,080,899 — (1,080,899 ) — Total liabilities 13,712 972,414 1,184,552 162,440 (1,082,808 ) 1,250,310 Total Sabra Health Care REIT, Inc. stockholders' equity 1,015,574 640,238 884,141 35,359 (1,559,738 ) 1,015,574 Noncontrolling interests — — — 35 — 35 Total equity 1,015,574 640,238 884,141 35,394 (1,559,738 ) 1,015,609 Total liabilities and equity $ 1,029,286 $ 1,612,652 $ 2,068,693 $ 197,834 $ (2,642,546 ) $ 2,265,919 CONDENSED CONSOLIDATING STATEMENT OF INCOME For the Three Months Ended March 31, 2017 (dollars in thousands, except per share amounts) (unaudited) Parent Company Issuers Combined Guarantor Subsidiaries Combined Non-Guarantor Elimination Consolidated Revenues: Rental income $ — $ — $ 53,039 $ 4,969 $ (784 ) $ 57,224 Interest and other income 7 — 1,938 — — 1,945 Resident fees and services — — — 3,481 — 3,481 Total revenues 7 — 54,977 8,450 (784 ) 62,650 Expenses: Depreciation and amortization 216 — 16,956 1,965 — 19,137 Interest — 13,409 728 1,651 — 15,788 Operating expenses — — — 3,204 (784 ) 2,420 General and administrative 5,916 15 797 145 — 6,873 Provision for (recovery of) doubtful accounts and loan losses (145 ) — 1,915 — — 1,770 Total expenses 5,987 13,424 20,396 6,965 (784 ) 45,988 Other income (expense): Other income (loss) 1,367 35 727 — — 2,129 Total other income (expense) 1,367 35 727 — — 2,129 Income in subsidiary 23,436 36,825 1,779 — (62,040 ) — Net income 18,823 23,436 37,087 1,485 (62,040 ) 18,791 Net loss attributable to noncontrolling interests — — — 32 — 32 Net income attributable to Sabra Health Care REIT, Inc. 18,823 23,436 37,087 1,517 (62,040 ) 18,823 Preferred stock dividends (2,561 ) — — — — (2,561 ) Net income attributable to common stockholders $ 16,262 $ 23,436 $ 37,087 $ 1,517 $ (62,040 ) $ 16,262 Net loss attributable to common stockholders, per: Basic common share $ 0.25 Diluted common share $ 0.25 Weighted-average number of common shares outstanding, basic 65,354,649 Weighted-average number of common shares outstanding, diluted 65,920,486 CONDENSED CONSOLIDATING STATEMENT OF LOSS For the Three Months Ended March 31, 2016 (dollars in thousands, except per share amounts) (unaudited) Parent Company Issuers Combined Combined Non-Guarantor Elimination Consolidated Revenues: Rental income $ — $ — $ 50,748 $ 4,800 $ (236 ) $ 55,312 Interest and other income — 119 5,395 — (182 ) 5,332 Resident fees and services — — — 1,915 — 1,915 Total revenues — 119 56,143 6,715 (418 ) 62,559 Expenses: Depreciation and amortization 183 — 16,015 1,568 — 17,766 Interest — 14,302 1,019 1,716 (119 ) 16,918 Operating expenses — — — 1,648 (236 ) 1,412 General and administrative 4,473 10 177 54 — 4,714 Provision for doubtful accounts and loan losses 233 — 2,290 — — 2,523 Impairment of real estate — — 29,811 — — — 29,811 Total expenses 4,889 14,312 49,312 4,986 (355 ) 73,144 Other income (expense): Loss on extinguishment of debt — (468 ) (88 ) — — (556 ) Other income (loss) — 500 (450 ) (50 ) — — Net loss on sales of real estate — — (4,602 ) — — (4,602 ) Total other income (expense) — 32 (5,140 ) (50 ) — (5,158 ) Income in subsidiary (10,759 ) 3,402 — — 7,357 — Net (loss) income (15,648 ) (10,759 ) 1,691 1,679 7,294 (15,743 ) Net loss attributable to noncontrolling interests — — — 32 — 32 Net (loss) income attributable to Sabra Health Care REIT, Inc. (15,648 ) (10,759 ) 1,691 1,711 7,294 (15,711 ) Preferred stock dividends (2,561 ) — — — — (2,561 ) Net (loss) income attributable to common stockholders $ (18,209 ) $ (10,759 ) $ 1,691 $ 1,711 $ 7,294 $ (18,272 ) Net loss attributable to common stockholders, per: Basic common share $ (0.28 ) Diluted common share $ (0.28 ) Weighted-average number of common shares outstanding, basic 65,248,203 Weighted-average number of common shares outstanding, diluted 65,248,203 CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME For the Three Months Ended March 31, 2017 (dollars in thousands) (unaudited) Parent Company Issuers Combined Combined Non-Guarantor Elimination Consolidated Net income $ 18,823 $ 23,436 $ 37,087 $ 1,485 $ (62,040 ) $ 18,791 Other comprehensive income (loss): Foreign currency translation (loss) income — (953 ) 299 96 — (558 ) Unrealized gain on cash flow hedge 285 443 — — — 728 Total other comprehensive (loss) income 285 (510 ) 299 96 — 170 Comprehensive income 19,108 22,926 37,386 1,581 (62,040 ) 18,961 Comprehensive loss attributable to noncontrolling interest — — — 32 — 32 Comprehensive income attributable to Sabra Health Care REIT, Inc. $ 19,108 $ 22,926 $ 37,386 $ 1,613 $ (62,040 ) $ 18,993 CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE LOSS For the Three Months Ended March 31, 2016 (dollars in thousands) (unaudited) Parent Company Issuers Combined Combined Non-Guarantor Elimination Consolidated Net (loss) income $ (15,648 ) $ (10,759 ) $ 1,691 $ 1,679 $ 7,294 $ (15,743 ) Other comprehensive (loss) income: Foreign currency translation (loss) income — (2,643 ) 1,516 554 — (573 ) Unrealized loss on cash flow hedge — (1,492 ) — — — (1,492 ) Total other comprehensive (loss) income — (4,135 ) 1,516 554 — (2,065 ) Comprehensive (loss) income (15,648 ) (14,894 ) 3,207 2,233 7,294 (17,808 ) Comprehensive loss attributable to noncontrolling interest — — — 32 — 32 Comprehensive (loss) income attributable to Sabra Health Care REIT, Inc. $ (15,648 ) $ (14,894 ) $ 3,207 $ 2,265 $ 7,294 $ (17,776 ) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS For the Three Months Ended March 31, 2017 (in thousands) (unaudited) Parent Company Issuers Combined Combined Non-Guarantor Elimination Consolidated Net cash provided by operating activities $ 27,886 $ — $ 1,017 $ 2,535 $ — $ 31,438 Cash flows from investing activities: Fundings of loans receivable — — (508 ) — — (508 ) Fundings of preferred equity investments — — (51 ) — — (51 ) Additions to real estate (1 ) — (474 ) (45 ) — (520 ) Repayment of loans receivable — — 118 — — 118 Distribution from subsidiary 2,474 2,474 — — (4,948 ) — Intercompany financing (10,025 ) (916 ) — — 10,941 — Net cash (used in) provided by investing activities (7,552 ) 1,558 (915 ) (45 ) 5,993 (961 ) Cash flows from financing activities: Net repayments from revolving credit facility — (9,000 ) — — — (9,000 ) Principal payments on mortgage notes — — — (1,021 ) — (1,021 ) Payments of deferred financing costs — (109 ) — — — (109 ) Issuance of common stock (3,224 ) — — — — (3,224 ) Dividends paid on common and preferred stock (29,993 ) — — — — (29,993 ) Distribution to parent — (2,474 ) — (2,474 ) 4,948 — Intercompany financing — 10,025 916 — (10,941 ) — Net cash (used in) provided by financing activities (33,217 ) (1,558 ) 916 (3,495 ) (5,993 ) (43,347 ) Net (decrease) increase in cash and cash equivalents (12,883 ) — 1,018 (1,005 ) — (12,870 ) Effect of foreign currency translation on cash and cash equivalents — — 14 7 — 21 Cash and cash equivalents, beginning of period 18,168 — 2,675 4,820 — 25,663 Cash and cash equivalents, end of period $ 5,285 $ — $ 3,707 $ 3,822 $ — $ 12,814 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS For the Three Months Ended March 31, 2016 (in thousands) (unaudited) Parent Company Issuers Combined Combined Non-Guarantor Elimination Consolidated Net cash provided by operating activities $ 21,718 $ — $ 1,430 $ 1,578 $ — $ 24,726 Cash flows from investing activities: Origination and fundings of loans receivable — — (5,850 ) — — (5,850 ) Origination and fundings of preferred equity investments — — (984 ) — — (984 ) Additions to real estate (74 ) — (400 ) — — (474 ) Repayment of loans receivable — — 8,874 — — 8,874 Investment in subsidiaries (200 ) (200 ) — — 400 — Net proceeds from the sale of real estate — — 398 — — 398 Distribution from subsidiaries 2,025 2,025 — — (4,050 ) — Intercompany financing 8,347 25,621 — — (33,968 ) — Net cash provided by investing activities 10,098 27,446 2,038 — (37,618 ) 1,964 Cash flows from financing activities: Net repayments from revolving credit facility — (57,000 ) — — — (57,000 ) Proceeds from term loan — 45,000 24,360 — — 69,360 Principal payments on mortgage notes — — (38 ) (984 ) — (1,022 ) Payments of deferred financing costs — (5,274 ) (611 ) — — (5,885 ) Issuance of common stock (1,274 ) — — — — (1,274 ) Dividends paid on common and preferred stock (29,301 ) — — — — (29,301 ) Contribution from parent — 200 — 200 (400 ) — Distribution to parent — (2,025 ) — (2,025 ) 4,050 — Intercompany financing — (8,347 ) (25,621 ) — 33,968 — Net cash used in financing activities (30,575 ) (27,446 ) (1,910 ) (2,809 ) 37,618 (25,122 ) Net increase (decrease) in cash and cash equivalents 1,241 — 1,558 (1,231 ) — 1,568 Effect of foreign currency translation on cash and cash equivalents — — 70 61 — 131 Cash and cash equivalents, beginning of period 2,548 — 456 4,430 — 7,434 Cash and cash equivalents, end of period $ 3,789 $ — $ 2,084 $ 3,260 $ — $ 9,133 |