Good day ladies and gentlemen, and welcome the Sabra Health Care REIT Inc. announces second quarter 2013 earnings conference call. This call is being recorded. I would now like to turn the call over to Talya Nevo, Chief Investment Officer. Please go ahead Ms. Nevo.

Thank you very much. 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 business strategies, expectations regarding our acquisitions and investment 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, 2012 that is 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 with 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 explanations and reconciliations of these measures to the comparable GAAP results included at the end of our earnings press release and the supplemental information materials included as Exhibits 99.1 and 99.2 respectively to the Form 8-K we furnished to the SEC yesterday. These materials can also be accessed in the Investor Relations section of our website at www.sabrahealth.com. And with that, let me turn the call over to Rick Matros, Chairman and CEO of Sabra Health Care REIT.

Thanks, Talya. And thanks everybody for joining us this morning. We appreciate it. I'll be discussing really our strategically, then move on to operational metrics and then I'll kick it over to Harold, who will go through the numbers in detail and then we will move on to Q&A. To start with, just talk about capital market strategy. As many you know, we've taken advantage in a very active and the capital markets, the first six months of the year but certainly second quarter of this year, having accessed the preferred equity early in the year. The high yield market earlier and in the middle of the second quarter and then as Friday closed our new revolver and this has really positioned us extremely well. We now have, when you add up, everything we've done and include the ATM which we haven't had the need to activate yet because of all the capital we've raised, we have an excess of $550 million in available capital, which, if you look at the current rate of growth, that we had over the past couple of years, will easily take us over the next couple of years and the point here I think is, we've been opportunistic taking advantage of a market that's been extremely [troughy] say the least. Many of us who have done a high yield, walk in $200 million (inaudible) and amazing opportunity for us. Now we will have the opportunity to grow the company and if you look at us doing 0.5 billion or so of acquisition at the current rate over the next two years will be much more diversified, much larger and we'll have ratings [results] and what we won't be depended upon the sloppy market to access good rates. So if you are asking really positioned…

Thanks a lot, Rick. Before I get into the details of our numbers for the quarter, I want to bring you back at some of Rick's comments, it's been a couple of minutes highlighting the recent activities in the capital markets and some of the other steps we have taken to increase on liquidity, improve our cost to capital both of which should enhance our long-term prospects for AFFO growth. At December 31, 2012; we had capacity to fund acquisitions about a $155 million from available cash and capacity under revolving of credit. We began 2013 expecting to finance our growth into the foreseeable future by utilizing this capacity and by putting into place a $100 million ATM program. As 2013 is important, we put the ATM program in place but also took advantage of two significant opportunities to access long-term capital and unprecedented pricing. First, we issued 5.8 million shares of 7% and 8% perpetual preferred equity, net in proceeds of a $138.4 million. This permanent capital was priced to 21 basis points of the yield-to-maturity on the bond offering we completed in 2012, which is due in 2018. Then in May we took advantage in extremely attractive bond market opportunity by issuing $200 million aggregate principal amount of 5.38% senior unsecured bonds to an indenture, to this pricing was the 154 basis points inside the yield to maturity for the 2011 bond offering I just referenced. In addition perpetual deferred equity offering created the opportunity to call back 35% of our $325 million aggregate principal amount of outstanding bonds that were issued in 2010 and 2012 having a 7.75% effective interest cost, this call back was completed in June of 2013. The $333.3 million of total net proceeds from these two transactions will utilize the number one we…

Thanks, Harold. We'll go to Q&A now.

(Operator Instructions) We'll take our first question from Tayo Okusanya with Jefferies.

How is the HUD financing, I mean just how much in regards to rate they are expecting as to say, like and kind of what current rate on and where do you kind of think you may end up.

Yeah, so early on a couple of months ago rates were still hovering around 3% and when Bernake made his comments and investors kind of got concerned about rising interest rate environment rates backed up to as high as the mid to high 4s. But talking to our lender earlier this week it locks and deals this week in the high 3s so below 4%. So our current GE debt all in to a little higher than 5% so when we get something locked in around 4 or a little bit lower than we're looking at a maybe 1% benefit and if things continue to settle in and improve maybe it will be a little better than that. But that's kind of the range we are looking at.

Yeah, and Tayo if you think about all of our mortgage debt. You know as you know we refinanced a bunch last year. All of our mortgage debt, all in will have a blended rate of maybe 3.75% and you're talking 30-year money.

And then second thing again congrats on the pipeline deal. It sounds like you have two other big ones coming in line. So you have this very nice acquisition pipeline in front of you, I guess the question is how quickly do you actually expect some of the stuff to close and the reason I ask that is if I am just tracking the first one you announced, First Phoenix, that was announced about a year ago, you expect, there are about 10 of these things and I think if I am correct, it really don't make one or two so far a year later.

Yes, because when we announced the pipeline, really, except for one or two, they were all just (inaudible). So by the time we built and stabilizing, we're looking about a two year period. So we're closer to stabilization on one particular facility now as well as nice (inaudible) show. We will see if we bring that in later this year but I think you will see a few next year. That's really the year after that they are going to be coming in sort of on a regular basis because by then you will had enough time. Given the size units or the five facilities that are being built, but these are 50 to 70 unit. So it's been that far. Assume 12 months to get it open and another 12 months to get it to 90% or so occupancy.

We'll take our next question from Emmanuel Korchman with Citi.

So, Rick, as you kind of go in to more of these relationships especially with different partners, can you just talk about how you expect maybe terms and timelines and volumes and all kind of stuff to change as sort of it becomes maybe more of a core part of your business rather something new?

The terms, we really all negotiated upfront, there are formulas for takeouts, stabilization. Those formulas really they're very much like what would happen if we just (inaudible) stabilize assets on a lease back basis, so it's trailing – performance with appropriate coverage that we are going to underwrite based on, so one, 2 or north of that on senior housing about 5 on SNFs those mix, 8% CapEx range for the senior housing stuff and something north of 9 for any skilled (inaudible), whole lot of that. And because it's a few year's out with some of these projects in some cases, there is also a spread to treasury with the cap on that, that will look as well, I don't know exactly what interest rates are going to be so that we sort of get some protection there, there's a put in place, there is a put in place with all cases and there is also an end dates, because as we know you've seen project out there that are pretty stabilized, for 25 years, so generally speaking, going to two years sort of drop that (inaudible) where some events going to happen.

No. That does. Do you see your, the preferred, returns you're getting sort of on just to preferred equity piece, do you see that changing with sort of the changes in the interest rate market, are you more of a needed financing provider I guess, is the right way to look at it?

Yeah. I think we are more of needed finance provider and then we are just a piece of cash taxes, but we are actually are very little development capital with, so if you guys are getting traditional construction loan, we make it easier to somebody get it, because we are providing preferred equity in the banks and we are do, they are to take it out so they can see the light at the end of the tunnel, but it's $10 million to $15 million project, we are in it about $3 million, so even though our return is relatively high, its high on not a whole out of dollars sort of stuff but they need it anyway. So the construction loan will take them to 65% to 75% rate of capital stack our preferred equity strip will take it to 90%, it may go a little bit higher and they are kicking the rest. And I guess our view on interest rate environment is yes it's going to go up but it's not going to jump up few 100 basis points a year over the next few years so they gradualize. And we expect the returns that we are currently getting which are called the 10% to 15% range kind of stay in that range.

And then do you have any interest in moving, how everyone look up or down in capital stack and providing natural construction fencing or are you happy just to be the preferred partner and then what the bank deal with the rest?

It's a good question, I think earlier on we didn't what to the entire capital stack because what's still most important for us just to diversify away from Genesis as quickly as possible by doing stabilized deals. We got so much capital available right now in certain circumstances, I want to preclude actually doing that particularly with guys that we already have the history with on this pipelines. And we may step up and do some different things. So for example on the New Dawn Sun City West memory care facility that we announced a few months ago, that facility just opened, so it wasn't stabilized yet, our operating marker had some very sensibility in there, and yes if we could take everybody out, even if facility wasn't stabilized. So we said yes, we got mortgage in place, that mortgage is a means to the end of kind of long-term instrument, we an option to purchase the facility upon stabilization. So, we got the option secured, we got cheaper money in play than we had and. So the answer is we will look at doing some of those things in certain circumstances, but there have to be a relationship that's already grounded and have history to it, that we feel good about in order to do that. And certainly as our cost of capital continues to improve and if interest rates go up, the spread between we're taking into construction loan and what we can do for them obviously narrows particularly, if you don't just look the rate on the loan, but you look at associated fees and deal with a bank and then just the general hospitals are dealing with one entity. So it is piece of the construction and then they deal with another and we've already had guys say to us denied at that some point just to deal with new construction not have to deal with anybody else. So that's long answer to your question. So the answer is yes in certain circumstances.

And then maybe my last one it should be quick. And maybe I missed it, in the $300 million pipeline that you're talking about how much of that's going to be stabilized product versus sort of these take some time to stabilize that product?

That's almost entirely stabilized. We're talking about the pipeline; we are not talking about any of our development, Scott. So we don't know how to stabilize assets?

We'll take our next question from Rob Mains with Stifel.

Just couple of questions, first Rick you talked about how cap rates really haven't moved. For you at least the cost of equity capital has gone up a little bit, what does that say about investment spreads? I know we are talking about issuing equity not this year in all likelihood.

Yeah, I think for us you know hedge back or pull back obviously in case you don't completely understand it. But it doesn't really; it doesn't affect us right now because we can't look at the stuff on a day-to-day basis. One is it has got more expensive but it's still lot more reasonable than it was a year ago. So we are still in relatively good shape there and we just believe that as we continue to execute, we've been doing it particularly because we hedged ourselves against rates for quite some time and the point of attack about with the exception of revolver once the rest of the [GE] gets refinanced to HUD all of our debt will be fixed. So we are really not that concerned about I mean, if we roll the clock forward because we have ATM to activate tool we need that and we look at when we might need to do an equity offering so when we want to take out the high yields in the fourth quarter of 2014, is that going to be an option?

We are going to be quite a big larger at that point. We are going to have Genesis well below 50% at that point all of which should be reflected in how we are trading. And it should equity a lot more reasonable and probably the only circumstance really that I could think of that would cause us to think about a follow-on sooner than later was if there was a big enough deal to justify it and it would have to be a pretty damn big deal because we've got so much capital available to do a big deal anyway. And the reality it's probably not all that realistic because we are not going to be subject scale deal because we don't want to go in that direction. And we see big senior housing deal, if it's too big, then the three bidders are going to be in there and they are just going to outbidding each other. So, probably not going to be able to competitive there. So it's unlikely. I think for us if we can think about a big senior housing deal, it's probably in the $100 million range and we certainly have plenty of capital to do that and everything else we're looking at without having to consider follow-on at this point in time.

You talked about competition for deals on one of the calls this morning kind of alluded to private REITs maybe being a less disciplined. I know you are seeing private equity anybody else other than the competitors that you talked about on prior calls for deals?

So, we're not seeing private equity yet. In terms of the private REITs being some are not disciplined, completely undisciplined. We see them once in a while. We don't see them that much. I mean, usually for us it's no different. Then what we've said in the past, senior housing stuff is usually see [LTT or an HI]. We actually haven't seen [S&H] at least not that we are aware of and then on the skilled stuff we see the same players may be Omega entity. So, we don't see Griffin-American as much as we used to because they have been doing a lot of [MLB] stuff and we haven't seen some other nearer to C&L really. We may see new capital at some point but we haven't seen them yet. So, usually I would say generally speaking on any deal we look at, there is usually a couple of other guys we're competing with but it's not big group.

On the private equity I would characterize the two names that we do see occasionally, [assets AW and Pru] REIT has not to be looking at the same assets or while we look at the same assets, we are not on the same ballpark on pricing, though we are not able to, I would not characterize as competing with them.

Okay. By not the same ballpark, your job, I can't give you baseball now, they are doing a higher end deals.

They are paying six caps, I don't know why, doing manage back, so I am structurally and in terms of price point they are in just good place.

Got, it, okay. And then one numbers question, I want to sure I understand the $1.4 million contingent liability, so it's earn on a 2.2 million that gets capitalize, but you collect rent on it?

No, it doesn't recapitalize, so when we close on the transaction, we booked a $1.3 million estimated earn-out and again you just have to make it for GAAP. Any changes those estimates flow through the P&L statement. So if you look at our last quarter numbers, we actually had a $0.5 million gain because it looked like performance was lagging from what we expected. This quarter performance went up dramatically resulting in the $1.4 million charge. So what will happen is when we write that check for the earn-out payments, the liability will obviously go in our balance sheet, but we'll also be recording rent of 8% on that additional investment, so we're paying rents associated with that. So on the books we've got $1.3 million associated with that earn-out and anything different from that was to the P&L and the actual cash out results in 8% return.

And then just clarification when you talk early about coverage and still makes everything that is for the quarter ended June 30?

Everything is quarter and no years.

Okay.

Yeah, everything is quarter and not year and skilled mix. It looks like it's a little bit wider as we sort of move into the second quarter and for the third quarter.

But that's then normal seasonality, right?

Yeah, occupancy actually has been moving. For our consolidated portfolio occupancy has been moving up since end of the quarter, so April and May occupancy is up over the first quarter and actually pretty significantly.

We will take our next question from Michael Carroll with RBC Capital Markets.

Harold, so is $0.45 is good FFO run rate going into the third quarter adding back that earn out charge?

So if you look at our supplement we have a pro forma FFO number and that pro forma kind of takes into account everything that's happened pushing it back to the beginning of the year, so it's about $0.42 on pro forma AFFO.

But that includes the charge for the earn-out right, that you should add that back to your run rate going into the third quarter?

No, that's pulled out of there as well, that's pulled out.

Okay. And then I know we have been waiting for the second half of '13 for your investment activity to really start ramping up and should we be expecting that to start pretty meaningfully in the third quarter or is that going to be weighted more towards the fourth quarter?

It is probably, it could be weighted more in the fourth quarter, the recent activity in the third quarter, but it's weighted more in the fourth quarter.

Okay. And then with the Meridian pipeline, can you give us a little bit more color on that, I think in the press release you have indicated that it could be one of the three product type, senior housing, memory care or skilled nursing facilities.

Yeah. It's primarily assisted living, there will be some memory care and they are looking at expanding or the existing projects that we're working on which will include memory care. The skilled nursing piece, you're not going to see that much of that, it's one facility that opened and selling up that had the rehab unit care that's spinning distance within to a hospital specifically at for a short term rehab unit . And Talya and I were in that building about a month ago and the thing is gorgeous. And when you go from the assisted living section to the to the skilled rehab unit you cannot tell the difference. And it's arguably the most non-institutional skilled rehab unit I have seen, but that was just specifically request the hospital, they're going to just fill it and it's not that big a unit, but I wouldn't expect to see much of that on a go forward basis in the first Phoenix pipeline and that meaning one of the thing (inaudible).

Okay. And then for each of these projects, how much preferred equity are you planning on putting it?

Seriously it's going to be somewhere around $3 million give or take.

The way we think about it is that we think about the cap stack as a whole and we could be pretty willing to go what is it if the conventional lenders willing to lend from between 65% to 75% of cost, we are willing to go up to call it 90% of cost and it's a real fill in that gap with the third party equity, that gives you a sense, but sort of given that the scale of the projects that we are looking at, the actual (inaudible) that's a good proxy.

Okay, then how many projects are picked out currently?

Well on Phoenix there's shooters, there's at least, there are two that we talked about because we already are, we already invested in them in some former fashion and four beyond that and that's in the program that it had had. It's planned to have tax. So they are already fixed or already identified you know at a minimum the lands entitled and some of them are shovel ready, ready to close on conventional financing and move ahead.

The new bill on which we have announced the pipeline yeah but we've announced two deals that will be a pipeline agreement as well. They have four additional projects besides the two where they -- it's not the land and they are in the process of working on with [Genstar] breaking ground. So there's four there and those are all memory care 48 units and then from already you know just announced they have just recently identified three or four parcels of land for primarily just willing to go on (inaudible) consumer right now.

I am showing that we have no further questions at this time. I would like to turn the call back over to Mr. Rick Matros for closing remarks.

Thanks for your time today. As always, Harold, Talya, and I are available for a follow-up. And again we're pleased with how things are going for us and particularly pleased that we weren't opportunistic as we were to set ourselves up on a go forward basis and be able to be more competitive than we've been able to be historically on acquisitions, particular on senior housing side. And with that, have a great day and we look forward to talking to you soon. Take care.

This does conclude today's conference. We thank you for your participation. You may now disconnect.