Good day, ladies and gentlemen, and welcome to the Sabra Health Care REIT Inc. first quarter 2014 earnings conference. This call is being recorded. I would now like to turn the call over to Talya Nevo-Hacohen, Chief Investment Officer. Please go ahead, Ms. Nevo.

Thank you. Before we begin, I want to remind you that we will be making forward-looking statements in our comments and in response to your questions concerning our expectations regarding our acquisition and investment plans, our expectations regarding our financing plans, 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, 2013, 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 to the SEC yesterday. We undertake no obligation to update our forward-looking statements to reflect subsequent events or circumstances, and you should not assume later in the quarter that the comments we make today are still valid. In addition, references will be made during this call to non-GAAP financial results. Investors are encouraged to review these non-GAAP financial measures, as well as the explanation and reconciliation of these measures to the comparable GAAP results included at the end of our earnings press release and the supplemental information materials included as Exhibits 99.1 and 99.2, respectively to the Form 8-K we furnished to the SEC yesterday. These materials can 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 are pleased to deliver strong first quarter results. We had 27% revenue growth, 23% normalized AFFO growth. We had just about $166 million in investment activity inclusive of April's announced investments. We're well on our way to our stated goal for the year and pretty much where we said we'd be by the end of June at $170 million. We completed $350 million aggregate principal amount of 5.5% senior unsecured notes earlier in the quarter. Our dividend's just been increased 6% to $0.38. Genesis' fixed charge coverage had a nice rebound coming in at 1.25 and let me point it out since we're doing trailing 12. I know some people were comparing to the 1.12 we reported in the last quarter, that was a trailing three. If you go apples-to-apples, they're actually at 1, 2, 3 on a trailing-three month basis. So still a huge improvement as we expected. Our revenues from private pay sources is now at 40.2% and that includes our private pay for more of our senior housing, the private pay within our skilled nursing facilities and the private pay from our hospital portfolio. We will be updating guidance shortly to reflect the activity to date as well as some pending activity shortly. And I would also expect as we continue to complete investment activity throughout the year, later on in the year, after this next update, we'll be updating guidance again. Our pipeline is very consistent as it's been in the last number of quarters. We range anywhere from about $325 million to $400 million, 60%-plus, 65% tends to be in senior housing. In terms of cap rates and competition, let me make a couple of comments. Cap rates have been stable relative to where…

Thanks, Rick. This morning I'll provide an overview of the results of operations for the first quarter of 2014 and our financial position as of the end of the quarter, including the pro-forma impact of certain activities during and subsequent to the quarter. For the three months ended March 31, 2014, we recorded revenues of $40.9 million compared to $32 million for the first quarter 2013, an increase of 27.6%. As of March 31, 2014, 47.7% of our revenues were derived from our leases to subsidiaries of Genesis and 69.9% were derived from skilled nursing related assets. These are down from 63.2% and 82.3% respectively as of March 31, 2013. In addition, we recorded $0.6 million of operating revenues from our recently initiated 50%/50% RIDEA-compliant senior housing operations joint venture. FFO for the quarter was negative $0.5 million and on a normalized basis was $21.7 million or $0.55 per diluted common share. Normalized excluded $22.1 million loss on extinguishment of debt, primarily associated with redemption of all the outstanding 8.125% due 2018. And a $0.1 million write-off of straight-line rental income, associated with entering into the new lease for our senior housing operation joint venture. This normalized FFO compares to $17.5 million or $0.46 per diluted common share for the first quarter of 2013, an increase of 19.6% on a per share basis. AFFO, which excludes from FFO acquisition pursuit costs and certain non-cash revenue and expenses, was $0.3 million and our normalized basis was $21.1 million or $0.53 per diluted common share compared to $16.6 million or $0.43 per diluted common share for the first quarter of 2013, a 23.3% increase on a per share basis, AFFO being normalized to exclude the $20.8 million cash portion of loss on extinguishment of debt. Net loss attributable to common stockholders was…

Thanks, Harold. One other comment before we turn it over to Q&A. We tweaked our reporting, as some of you noted to just trailing 12 or reporting trailing three historically, and the reason we did that was really based on a lot of feedbacks that we got. As far as we know we were the only one who is doing that, because of the skilled nursing portfolio and the amount of seasonality that affects that portfolio. The numbers really swing wildly as many of you know from quarter-to-quarter. So reporting on a trailing 12 kind of smoothes out the seasonality and also puts us in line with our peer group. So with that, I will turn it over to Q&A.

(Operator Instructions) We'll hear first from Emmanuel Korchman from Citi.

This is Archena Alagappan for Manny Korchman. So you spoke a little bit about using more of the ATM going forward to match fund your investments putting a new ATM in place. So how do you think about like a more appropriate run rate leverage going forward and why more of the ATM versus a larger equity issuance or maybe thought of issuing a preferred?

Our leverage goal, as we talked about a little bit in the last quarter is to get to closer to 4x versus where it is today. And we had also commented in the past and reiterate that now is that the idea of doing a follow-on certainly isn't out of the question. The ATM obviously is great for matching funds, but the issue for us with the ATM is really twofold. One, given all the blackout periods, you really eliminate in terms of how much you can as use, which for us is execrated by the fact that we don't have that much average trading volumes. So usually with the ATM you're looking at 10% of your average volume, maybe 15%, if you want to push it. So you don't get as much there as you'd like, at least for us in particular point in time. So we'll consider other avenues in terms of doing another preferred on equity offering, that's probably not in the cards. As you probably know, the agencies view that primarily as debt. One of the agencies views it as a 100% debt. Another one of the agencies views it as 75% debt, so that would take our leverage really in the wrong direction. That's really not what we want to do, we want to deleverage the balance sheet.

We'll take our next question from Michael Carroll from RBC Capital Markets.

Do you expect any additional investments to close in the first half of '14? I think the original expectation is $170 million, and you're already at $166 million right now?

Well, we're working on the stuff, so whether we get to close it or not, we're going to do our best.

And then will Genesis's able to fully recover the implementation of those operational synergies? Should we expect incremental improvements next quarter in their ratios?

Yes, I think, I mean in the first quarter what I would expect to see is good fundamentals relative to particularly this half line and temporary hit because of the weather, which everybody is kind of seeing, but that's very specific to, as I mentioned the utility costs, which by the time March and April would have already normalizing and therapy productivity was off in the first quarter, due to the same factor and that was already normalized by the end of the first quarter. So we feel like at this point with all the penetration behind and really having Sun on the old platform for first time, with the same budget and that kind of thing, that is starting to get a little bit of traction and really starting to get their arms around the business. And obviously the 2% Medicare increase is going to help everybody that completely offset sequestration for last year.

Then how much will the weather impact to those coverage ratios, I mean will it register on a trailing 12-month basis?

We'll register it big time on trailing 12 month-basis and that's obviously is kind of the benefit of doing that. And we're just getting March numbers in from Genesis. So I don't have a solid number on that yet, but it's not going to freak everybody out.

And then, Harold, are we largely done with the HUD refinancing, which I guess it sounded like in your comments that you're going to take out about $30 million of HUD later in the year to refinance those mortgages that you paid off. Is there anything else outside of that?

No that's it. We did issue new HUD loan through the acquisition, but we basically, with this last piece all of our legacy mortgage debt now and including -- actually all of our mortgage debt will be with HUD after we complete this $30 million later this year. And so right now, all of the mortgage debt that we have on the balance sheet is with HUD. And obviously, the $30 million was paid off with the revolver in the short-term. But it's just a matter of getting through the process with HUD, as you know that will take several months. But we'll be kicking off that process here very shortly.

We'll here next from Omotayo Okusanya from Jefferies.

So you were kind of about kind of pending acquisition volume going forward. Again you guys are pretty much on track in regards to the amount of acquisition you expect to do this year versus what you've guided to. Just curious, if you could talk a little bit about this pending transactions about how large it could be? And just whether you guys are setting up for a year where your acquisition volume is even better than you were initially expecting?

I can't be specific as you never know exactly what's going to happen, basically there were a couple of a things that we thought we had a shot, and this is generalized activity that we had a shot at getting done. We would have updated in conjunction with this release. So we'll be updating shortly.

Are they big like $100 million, $200 million type transaction or are they smaller transaction?

I think we're mostly working on our transaction that are in the range of most of the stuff we do which is probably $30 million to $60 million. And again not trying to be mysterious, but if we [indiscernible]. In terms of acquisition volume for the year, we are still sticking with kind of what we said back in January, we had put guidance out $350 million to $400 million and that will still be our best year. So if we can do more than that, obviously we'd love to do more in that.

And could you just talk a little bit about what the mix is? Is it maybe mainly more on assisted living? Is it more on skilled nursing?

It's primarily senior housing, the only other potential main factor in there is that we'll finish fund in the Fort Worth construction loan and we have a ways to go on that. And then we'll see whether we are ready to exercise the purchase option on the Dallas hospital. So other than that, I mean other than those two hospitals pieces, we would expect to do, majority of senior housing with seven skilled nursing.

And then lastly, I mean, the one thing we did notice in regards to the coverage ratios was the acute care hospital portfolio, the coverage did drop quite a bit there, just kind of curious what's going on with that?

I think it's really just a function of --we've only got two hospitals in there. And so it just doesn't take much for that to fluctuate from quarter-to-quarter. There wasn't anything kind of unusual. There wasn't anything kind of trending. But for the Frisco hospital is going more and more from out of network to in-network. They are negotiating new in-network contracts with United for example. So we expect volume to increase with United. So that really drives a lot of the fluctuation as you're going from out of network in to in-network for everybody who sort of follows the hospital sector. You will have fluctuations in volume until you got the new in-network contract in place and when you have a new in-network contract in place, your tenancy volumes improve with that particular insurer.

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

Harold, the right day I know it's not a big number yet, but are the revenues for that -- are those embedded in rental revenue line?

No, it's in interest income and other.

So just as with G&A, we should expect to bump to interest income and other rising from that?

Yes, but one thing, it's more material, we'll call it out of a separate line item, but at this point it's just too small to call out.

And Rick, you talked about the impact of weather on operations. It sounds like you talked about kind of expense items. Did it also affect either move-ins or as it in the case of Genesis occupancy and referrals?

No, because everybody talks the weather and I actually hate kind of talking about the weather. But it's just kind of the first quarter reality. But on the expense side, it's specifically on the utility line. On the topline, it actually did not affect move-ins on the senior housing side or occupancy on the skilled side, either with Genesis or other skilled nursing partners. What it did affect was therapy productivity, so the ability of the therapist to get in on a timely basis and get in everyday because you've got to spread therapy out under the rules of seven days in order to maximize treatment to the patients. And that's what it really affected this therapy productivity, not occupancy specifically or skilled mix.

So did some of the patients rugged down as a result?

That's exactly right, they rugged out, right.

And then I know this is kind of dwelling on what's not a big part of something that you control, but I think last year you had mentioned that Genesis in addition to some of the structural things that's going on, had seen lower volume coming from the hospitals. It sounds like, can I infer from what you were saying that that's sort of anniversaried?

I mean, I think that the whole sector still suffers from the observations day syndrome with the hospitals. As you know, CMS put that rule that two-midnight hospital rule in place, but then they got delayed. So that kind of hasn't really changed much. And so I think observation days, it's still the main thing that's preventing skilled mix from growing where we would like to see it grow, but it's certainly not getting any, it's not getting worse. But that said, Genesis is seeing some improvement in overall topline volumes in 2014.

And my last question. When you were calling out the cap rates for the different types of asset types and you mentioned 7% for independent living. Should we still infer from that figure that your investments are going to be more AL and memory care?

Yes.

At this time I show we have no further questions. So I'd like to turn the call back to Rick Matros for closing comments.

Thank you everybody for your time today. As always, Harold, Talya and myself are available for follow-up calls. And we look forward to talking to you all soon, to those of you that will be joining us for our Analyst Day in Dallas on May 19th and 20th. We look forward to seeing you there. Thanks very much and have a great day.

This does conclude today's conference. We thank you for your participation.