UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2018~~2019



o☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-34950

SABRA HEALTH CARE REIT, INC.

(Exact Name of Registrant as Specified in Its Charter)



Maryland		27-2560479
(State of Incorporation)		(I.R.S. Employer Identification No.)

18500 Von Karman Avenue, Suite 550

Irvine, CA92612

~~(888)~~ (888) 393-8248

(Address, zip code and telephone number of Registrant)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, $.01 par value	SBRA	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx☒ No o☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yesx☒ No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No x☒

As of August ~~2, 2018,~~1, 2019, there were ~~178,283,590~~189,515,024 shares of the registrant’s $0.01 par value Common Stock outstanding.

SABRA HEALTH CARE REIT, INC. AND SUBSIDIARIES

Index

References throughout this document to “Sabra,” “we,” “our,” “ours” and “us” refer to Sabra Health Care REIT, Inc. and its direct and indirect consolidated subsidiaries and not any other person.

STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q (this “10-Q”) contain “forward-looking” information as that term is defined by the Private Securities Litigation Reform Act of 1995. Any statements that do not relate to historical or current facts or matters are forward-looking statements. Examples of forward-looking statements include all statements regarding our expected future financial position, results of operations, cash flows, liquidity, financing plans, business strategy, tenants, the expected amounts and timing of dividends and other distributions, projected expenses and capital expenditures, competitive position, growth opportunities, potential investments, potential dispositions, plans and objectives for future operations, and compliance with and changes in governmental regulations. You can identify some of the forward-looking statements by the use of forward-looking words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “should,” “may” and other similar expressions, although not all forward-looking statements contain these identifying words.

Our actual results may differ materially from those projected or contemplated by our forward-looking statements as a result of various factors, including, among others, the following:

our dependence on the operating success of our tenants;

the potential variability of our reported rental and related revenues following the adoption of Topic 842 (as defined below) on January 1, 2019;

operational risks with respect to our Senior Housing - Managed communities (as defined below);

the effect of our tenants declaring bankruptcy or becoming insolvent;

our ability to find replacement tenants and the impact of unforeseen costs in acquiring new properties;

the impact of litigation and rising insurance costs on the business of our tenants;

our ability to implement the previously announced rent repositioning program for certain of our tenants who were legacy tenants of Care Capital Properties, Inc. (“CCP”) on the timing or terms we have previously disclosed;

~~our ability to dispose of facilities currently leased to Genesis Healthcare, Inc. (“Genesis”) on the timing or terms we have previously disclosed;~~

the possibility that Sabra may not acquire the remaining majority interest in the Enlivant Joint Venture (as defined below);

risks associated with our investments in joint ventures;

changes in healthcare regulation and political or economic conditions;

the impact of required regulatory approvals of transfers of healthcare properties;

competitive conditions in our industry;

our concentration in the healthcare property sector, particularly in skilled nursing/transitional care facilities and senior housing communities, which makes our profitability more vulnerable to a downturn in a specific sector than if we were investing in multiple industries;

the significant amount of and our ability to service our indebtedness;

covenants in our debt agreements that may restrict our ability to pay dividends, make investments, incur additional indebtedness and refinance indebtedness on favorable terms;

increases in market interest rates;

the potential phasing out of the London Interbank Offered Rate (“LIBOR”) benchmark after 2021;

our ability to raise capital through equity and debt financings;

changes in foreign currency exchange rates;

the relatively illiquid nature of real estate investments;

the loss of key management ~~personnel or other employees;~~personnel;

uninsured or underinsured losses affecting our properties and the possibility of environmental compliance costs and liabilities;

the impact of a failure or security breach of information technology in our operations;

our ability to maintain our status as a real estate investment trust (“REIT”);

changes in tax laws and regulations affecting REITs (including the potential effects of the Tax Cuts and Jobs Act);

compliance with REIT requirements and certain tax and tax regulatory matters related to our status as a REIT; and

the ownership limits and ~~anti-takeover~~takeover defenses in our governing documents and under Maryland law, which may restrict change of control or business combination opportunities.

We urge you to carefully consider these risks and review the additional disclosures we make concerning risks and other factors that may materially affect the outcome of our forward-looking statements and our future business and operating results, including those made in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 (our ~~“2017~~“2018 Annual Report on Form 10-K”), and in Part II, Item 1A, “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission (the “SEC”), including subsequent Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. We caution you that any forward-looking statements made in this 10-Q are

~~10-Q are~~ not guarantees of future performance, events or results, and you should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. We do not intend, and we undertake no obligation, to update any forward-looking information to reflect events or circumstances after the date of this 10-Q or to reflect the occurrence of unanticipated events, unless required by law to do so.

PART I. FINANCIAL INFORMATION



ITEM 1.	FINANCIAL STATEMENTS

SABRA HEALTH CARE REIT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)


	June 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
	(unaudited)						(unaudited)
Assets
Real estate investments, net of accumulated depreciation of $377,159 and $340,423 as of June 30, 2018 and December 31, 2017, respectively	$	5,993,682		$	5,994,432
Real estate investments, net of accumulated depreciation of $464,970 and $402,338 as of June 30, 2019 and December 31, 2018, respectively							$	5,378,874		$	5,853,545
Loans receivable and other investments, net	107,228			114,390			111,203			113,722
Investment in unconsolidated joint venture	348,950			—			328,207			340,120
Cash and cash equivalents	38,809			518,632			47,595			50,230
Restricted cash	186,845			68,817			9,879			9,428
Lease intangible assets, net	156,266			167,119			108,877			131,097
Accounts receivable, prepaid expenses and other assets, net	196,364			168,887			138,544			167,161
Total assets	$	7,028,144		$	7,032,277		$	6,123,179		$	6,665,303

Liabilities
Secured debt, net	$	253,567		$	256,430		$	114,675		$	115,679
Revolving credit facility	676,000			641,000			275,000			624,000
Term loans, net	1,187,398			1,190,774			1,189,774			1,184,930
Senior unsecured notes, net	1,306,842			1,306,286			1,106,518			1,307,394
Accounts payable and accrued liabilities	105,339			102,523			100,635			94,827
Lease intangible liabilities, net	91,073			98,015			76,201			83,726
Total liabilities	3,620,219			3,595,028			2,862,803			3,410,556

Commitments and contingencies (Note 13)

Equity
Preferred stock, $.01 par value; 10,000,000 shares authorized, 5,750,000 shares issued and outstanding as of December 31, 2017	—			58
Common stock, $.01 par value; 250,000,000 shares authorized, 178,283,590 and 178,255,843 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively	1,783			1,783
Common stock, $.01 par value; 250,000,000 shares authorized, 189,515,024 and 178,306,528 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively							1,895			1,783
Additional paid-in capital	3,502,954			3,636,913			3,725,971			3,507,925
Cumulative distributions in excess of net income	(125,606		)	(217,236		)	(460,832		)	(271,595		)
Accumulated other comprehensive income	24,412			11,289
Accumulated other comprehensive (loss) income							(10,936		)	12,301
Total Sabra Health Care REIT, Inc. stockholders’ equity	3,403,543			3,432,807			3,256,098			3,250,414
Noncontrolling interests	4,382			4,442			4,278			4,333
Total equity	3,407,925			3,437,249			3,260,376			3,254,747
Total liabilities and equity	$	7,028,144		$	7,032,277		$	6,123,179		$	6,665,303

See accompanying notes to condensed consolidated financial statements.

SABRA HEALTH CARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Revenues:
Rental income	$	144,229		$	55,904		$	288,484		$	113,128
Rental and related revenues													$	112,800		$	144,229		$	229,187		$	288,484
Interest and other income	4,553			2,027			8,891			3,972			70,495			4,553			73,820			8,891
Resident fees and services	17,530			6,805			35,023			10,286			36,071			17,530			53,132			35,023

Total revenues	166,312			64,736			332,398			127,386			219,366			166,312			356,139			332,398

Expenses:
Depreciation and amortization	46,828			17,220			94,833			36,357			49,476			46,828			94,425			94,833
Interest	36,757			15,862			72,575			31,650			33,608			36,757			69,926			72,575
Operating expenses	12,299			4,407			24,423			6,827
Triple-net portfolio operating expenses													6,240			—			11,529			—
Senior housing - managed portfolio operating expenses													24,239			12,299			36,279			24,423
General and administrative	9,271			5,126			17,138			11,215			8,059			9,383			16,243			17,580
Merger and acquisition costs	112			5,887			442			6,451
(Recovery of) provision for doubtful accounts and loan losses	(674		)	535			539			2,305
Provision for (recovery of) doubtful accounts, straight-line rental income and loan losses													193			(674		)	1,400			539
Impairment of real estate	881			—			1,413			—			2,002			881			105,136			1,413

Total expenses	105,474			49,037			211,363			94,805			123,817			105,474			334,938			211,363

Other income:
Other income	—			941			2,820			3,070
Other (expense) income:
Loss on extinguishment of debt													(10,119		)	—			(10,119		)	—
Other (expense) income													(1		)	—			170			2,820
Net gain on sales of real estate	142,903			4,032			142,431			4,032			2,755			142,903			1,235			142,431

Total other income	142,903			4,973			145,251			7,102
Total other (expense) income													(7,365		)	142,903			(8,714		)	145,251

Income before loss from unconsolidated joint venture and income tax expense	203,741			20,672			266,286			39,683			88,184			203,741			12,487			266,286

Loss from unconsolidated joint venture	(2,347		)	—			(1,901		)	—			(3,647		)	(2,347		)	(5,030		)	(1,901		)
Income tax expense	(605		)	(136		)	(1,115		)	(356		)	(854		)	(605		)	(1,466		)	(1,115		)

Net income	200,789			20,536			263,270			39,327			83,683			200,789			5,991			263,270

Net (income) loss attributable to noncontrolling interests	(2		)	(16		)	(12		)	16
Net income attributable to noncontrolling interests													(6		)	(2		)	(18		)	(12		)

Net income attributable to Sabra Health Care REIT, Inc.	200,787			20,520			263,258			39,343			83,677			200,787			5,973			263,258

Preferred stock dividends	(7,207		)	(2,560		)	(9,768		)	(5,121		)	—			(7,207		)	—			(9,768		)

Net income attributable to common stockholders	$	193,580		$	17,960		$	253,490		$	34,222		$	83,677		$	193,580		$	5,973		$	253,490

Net income attributable to common stockholders, per:

Basic common share	$	1.09		$	0.27		$	1.42		$	0.52		$	0.46		$	1.09		$	0.03		$	1.42

Diluted common share	$	1.08		$	0.27		$	1.42		$	0.52		$	0.46		$	1.08		$	0.03		$	1.42

Weighted-average number of common shares outstanding, basic	178,314,750			65,438,739			178,304,733			65,396,146			181,567,464			178,314,750			179,984,959			178,304,733

Weighted-average number of common shares outstanding, diluted	178,684,024			65,670,853			178,600,789			65,694,019			182,254,100			178,684,024			180,637,059			178,600,789

Dividends declared per common share	$	0.45		$	0.43		$	0.90		$	0.85

See accompanying notes to condensed consolidated financial statements.

SABRA HEALTH CARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018

Net income	$	83,683		$	200,789		$	5,991		$	263,270
Other comprehensive income (loss):
Unrealized gain (loss), net of tax:
Foreign currency translation gain (loss)	567			261			7			(113		)
Unrealized (loss) gain on cash flow hedges	(9,756		)	3,338			(23,244		)	13,236

Total other comprehensive (loss) income	(9,189		)	3,599			(23,237		)	13,123

Comprehensive income (loss)	74,494			204,388			(17,246		)	276,393

Comprehensive income attributable to noncontrolling interests	(6		)	(2		)	(18		)	(12		)

Comprehensive income (loss) attributable to Sabra Health Care REIT, Inc.	$	74,488		$	204,386		$	(17,264	)	$	276,381

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017

Net income $ 200,789
$ 20,536
$ 263,270
$ 39,327
Other comprehensive income (loss):
Unrealized gain (loss), net of tax:
Foreign currency translation gain (loss) 261
698
(113 ) 140
Unrealized gain on cash flow hedges 3,338
97
13,236
825

Total other comprehensive income 3,599
795
13,123
965

Comprehensive income 204,388
21,331
276,393
40,292

Comprehensive (income) loss attributable to noncontrolling interest (2 ) (16 ) (12 ) 16

Comprehensive income attributable to Sabra Health Care REIT, Inc. $ 204,386
$ 21,315
$ 276,381
$ 40,308

See accompanying notes to condensed consolidated financial statements.

SABRA HEALTH CARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(dollars in thousands, except per share data)

(unaudited)


	Preferred Stock					Common Stock			Additional Paid-in Capital				Cumulative Distributions in Excess of Net Income			Accumulated Other Comprehensive Income (Loss)				Total Stockholders’ Equity				Noncontrolling Interests				Total Equity				Three Months Ended June 30, 2018
	Shares		Amounts			Shares	Amounts									Accumulated Other Comprehensive Income (Loss)			Preferred Stock									Total Equity			Common Stock						Additional Paid-in Capital				Cumulative Distributions in Excess of Net Income				Accumulated Other Comprehensive Income (Loss)				Total Stockholders’ Equity				Noncontrolling Interests				Total Equity
Balance, December 31, 2016	5,750,000		$	58		65,285,614	$	653	Additional Paid-in Capital			$	Cumulative Distributions in Excess of Net Income	1,208,862		$	(192,201	)		Total Stockholders’ Equity			$	Noncontrolling Interests	(1,798	)		$	1,015,574			$	35		$	1,015,609	Additional Paid-in Capital				Cumulative Distributions in Excess of Net Income
Net income (loss)	—		—			—	—		—				39,343			—				39,343				(16		)		39,327
Other comprehensive income	—		—			—	—		—				—			965				965				—				965
Amortization of stock-based compensation	—		—			—	—		4,848				—			—				4,848				—				4,848
Common stock issuance, net	—		—			139,820	1		(2,815		)		—			—				(2,814		)		—				(2,814		)
Preferred dividends	—		—			—	—		—				(5,121		)	—				(5,121		)		—				(5,121		)
Common dividends ($0.85 per share)	—		—			—	—		—				(56,099		)	—				(56,099		)		—				(56,099		)
Balance, June 30, 2017	5,750,000		$	58		65,425,434	$	654	$	1,210,895			$	(214,078	)	$	(833	)		$	996,696			$	19			$	996,715
																																Shares		Amounts				Shares			Amounts				Accumulated Other Comprehensive Income (Loss)			Additional Paid-in Capital					Noncontrolling Interests			Cumulative Distributions in Excess of Net Income					Accumulated Other Comprehensive Income (Loss)				Total Stockholders’ Equity				Noncontrolling Interests		Total Equity
																																																								Cumulative Distributions in Excess of Net Income					Accumulated Other Comprehensive Income (Loss)				Total Stockholders’ Equity				Noncontrolling Interests		Total Equity
	Preferred Stock					Common Stock			Additional Paid-in Capital				Cumulative Distributions in Excess of Net Income			Accumulated Other Comprehensive Income (Loss)				Total Stockholders’ Equity				Noncontrolling Interests				Total Equity
	Shares		Amount			Shares	Amounts
Balance, December 31, 2017	5,750,000		$	58		178,255,843	$	1,783	Additional Paid-in Capital			$	Cumulative Distributions in Excess of Net Income	3,636,913		Accumulated Other Comprehensive Income (Loss)			$	Total Stockholders’ Equity			(217,236	Noncontrolling Interests			)	Total Equity				$	11,289		$	3,432,807			$	4,442			$	3,437,249
Cumulative effect of ASU 2017-12 adoption	—		—			—	—		—				(795		)	795				—				—				—
Balance, March 31, 2018																																5,750,000		$	58			178,282,370			$	1,783			$	3,638,109		Additional Paid-in Capital			$	(238,612	)		$	20,813			$	3,422,151			$	4,415			$	3,426,566
Net income	—		—			—	—		—				263,258			—				263,258				12				263,270				—		—				—			—				—				200,787				—				200,787				2				200,789
Other comprehensive income	—		—			—	—		—				—			12,328				12,328				—				12,328				—		—				—			—				—				—				3,599				3,599				—				3,599
Distributions to noncontrolling interests	—		—			—	—		—				—			—				—				(72		)		(72		)		—		—				—			—				—				—				—				—				(35		)		(35		)
Amortization of stock-based compensation	—		—			—	—		4,434				—			—				4,434				—				4,434				—		—				—			—				3,036				—				—				3,036				—				3,036
Preferred stock redemption	(5,750,000	)	(58		)	—	—		(138,191		)		(5,501		)	—				(143,750		)		—				(143,750		)		(5,750,000	)	(58		)		—			—				(138,191		)		(5,501		)		—				(143,750		)		—				(143,750		)
Common stock issuance, net	—		—			27,747	—		(202		)		—			—				(202		)		—				(202		)		—		—				1,220			—				—				—				—				—				—				—
Preferred dividends	—		—			—	—		—				(4,267		)	—				(4,267		)		—				(4,267		)		—		—				—			—				—				(1,706		)		—				(1,706		)		—				(1,706		)
Common dividends ($0.90 per share)	—		—			—	—		—				(161,065		)	—				(161,065		)		—				(161,065		)
Common dividends ($0.45 per share)																																—		—				—			—				—				(80,574		)		—				(80,574		)		—				(80,574		)
Balance, June 30, 2018	—		$	—		178,283,590	$	1,783	$	3,502,954			$	(125,606	)	$	24,412			$	3,403,543			$	4,382			$	3,407,925			—		$	—			178,283,590			$	1,783			$	3,502,954			$	(125,606	)		$	24,412			$	3,403,543			$	4,382			$	3,407,925


																																Three Months Ended June 30, 2019
																																Preferred Stock						Common Stock							Additional Paid-in Capital				Cumulative Distributions in Excess of Net Income				Accumulated Other Comprehensive Income (Loss)				Total Stockholders’ Equity				Noncontrolling Interests				Total Equity
																																Shares		Amounts				Shares			Amounts												Accumulated Other Comprehensive Income (Loss)				Total Stockholders’ Equity				Noncontrolling Interests				Total Equity
Balance, March 31, 2019																																—		$	—			178,419,599			$	1,784			Additional Paid-in Capital			$	Cumulative Distributions in Excess of Net Income	3,508,987			$	(462,555	)		$	(1,747	)		$	3,046,469			$	4,309			$	3,050,778
Net income																																—		—				—			—				—				83,677				—				83,677				6				83,683
Other comprehensive loss																																—		—				—			—				—				—				(9,189		)		(9,189		)		—				(9,189		)
Distributions to noncontrolling interests																																—		—				—			—				—				—				—				—				(37		)		(37		)
Amortization of stock-based compensation																																—		—				—			—				3,274				—				—				3,274				—				3,274
Common stock issuance, net																																—		—				11,095,425			111				213,710				—				—				213,821				—				213,821
Common dividends ($0.45 per share)																																—		—				—			—				—				(81,954		)		—				(81,954		)		—				(81,954		)
Balance, June 30, 2019																																—		$	—			189,515,024			$	1,895			$	3,725,971			$	(460,832	)		$	(10,936	)		$	3,256,098			$	4,278			$	3,260,376

See accompanying notes to condensed consolidated financial statements.

SABRA HEALTH CARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED)

(dollars in thousands, except per share data)

(unaudited)



	Six Months Ended June 30, 2018
	Preferred Stock					Common Stock			Additional Paid-in Capital			Cumulative Distributions in Excess of Net Income			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity			Noncontrolling Interests			Total Equity
	Shares		Amounts			Shares	Amounts		Additional Paid-in Capital			Cumulative Distributions in Excess of Net Income			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance, December 31, 2017	5,750,000		$	58		178,255,843	$	1,783	$	3,636,913		$	(217,236	)	$	11,289		$	3,432,807		$	4,442		$	3,437,249
Cumulative effect of ASU 2017-12 adoption	—		—			—	—		—			(795		)	795			—			—			—
Net income	—		—			—	—		—			263,258			—			263,258			12			263,270
Other comprehensive income	—		—			—	—		—			—			12,328			12,328			—			12,328
Distributions to noncontrolling interests	—		—			—	—		—			—			—			—			(72		)	(72		)
Amortization of stock-based compensation	—		—			—	—		4,434			—			—			4,434			—			4,434
Preferred stock redemption	(5,750,000	)	(58		)	—	—		(138,191		)	(5,501		)	—			(143,750		)	—			(143,750		)
Common stock issuance, net	—		—			27,747	—		(202		)	—			—			(202		)	—			(202		)
Preferred dividends	—		—			—	—		—			(4,267		)	—			(4,267		)	—			(4,267		)
Common dividends ($0.90 per share)	—		—			—	—		—			(161,065		)	—			(161,065		)	—			(161,065		)
Balance, June 30, 2018	—		$	—		178,283,590	$	1,783	$	3,502,954		$	(125,606	)	$	24,412		$	3,403,543		$	4,382		$	3,407,925


	Six Months Ended June 30, 2019
	Preferred Stock					Common Stock			Additional Paid-in Capital			Cumulative Distributions in Excess of Net Income			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity			Noncontrolling Interests			Total Equity
	Shares		Amounts			Shares	Amounts		Additional Paid-in Capital			Cumulative Distributions in Excess of Net Income			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance, December 31, 2018	—		$	—		178,306,528	$	1,783	$	3,507,925		$	(271,595	)	$	12,301		$	3,250,414		$	4,333		$	3,254,747
Cumulative effect of Topic 842 adoption	—		—			—	—		—			(32,502		)	—			(32,502		)	—			(32,502		)
Net income	—		—			—	—		—			5,973			—			5,973			18			5,991
Other comprehensive loss	—		—			—	—		—			—			(23,237		)	(23,237		)	—			(23,237		)
Distributions to noncontrolling interests	—		—			—	—		—			—			—			—			(73		)	(73		)
Amortization of stock-based compensation	—		—			—	—		6,544			—			—			6,544			—			6,544
Common stock issuance, net	—		—			11,208,496	112		211,502			—			—			211,614			—			211,614
Common dividends ($0.90 per share)	—		—			—	—		—			(162,708		)	—			(162,708		)	—			(162,708		)
Balance, June 30, 2019	—		$	—		189,515,024	$	1,895	$	3,725,971		$	(460,832	)	$	(10,936	)	$	3,256,098		$	4,278		$	3,260,376

See accompanying notes to condensed consolidated financial statements.

SABRA HEALTH CARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Six Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2019			2018
Cash flows from operating activities:
Net income	$	263,270		$	39,327		$	5,991		$	263,270
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	94,833			36,357			94,425			94,833
Amortization of above and below market lease intangibles, net	(1,368		)	—			2,703			(1,368		)
Non-cash interest income adjustments	(1,174		)	51			(1,125		)	(1,174		)
Non-cash interest expense	4,997			3,244			5,323			4,997
Stock-based compensation expense	3,839			4,319			5,570			3,839
Non-cash lease termination income							(9,725		)	—
Loss on extinguishment of debt							10,119			—
Straight-line rental income adjustments	(23,752		)	(9,578		)	(10,710		)	(23,752		)
Provision for doubtful accounts and loan losses	539			2,305
Change in fair value of contingent consideration	—			(822		)
Provision for doubtful accounts, straight-line rental income and loan losses							1,400			539
Net gain on sales of real estate	(142,431		)	(4,032		)	(1,235		)	(142,431		)
Impairment of real estate	1,413			—			105,136			1,413
Loss from unconsolidated joint venture	1,901			—			5,030			1,901
Distributions of earnings from unconsolidated joint venture	3,610			—			6,884			3,610
Changes in operating assets and liabilities:
Accounts receivable, prepaid expenses and other assets, net	(2,130		)	(15,575		)	(5,289		)	(2,130		)
Accounts payable and accrued liabilities	8,006			(1,314		)	(22,619		)	8,006

Net cash provided by operating activities	211,553			54,282			191,878			211,553
Cash flows from investing activities:
Acquisition of real estate	(213,982		)	(14,456		)	—			(213,982		)
Origination and fundings of loans receivable	(28,157		)	(927		)	(8,823		)	(28,157		)
Origination and fundings of preferred equity investments	(945		)	(76		)	—			(945		)
Additions to real estate	(16,817		)	(1,294		)	(8,596		)	(16,817		)
Repayments of loans receivable	38,887			1,547			10,102			38,887
Repayments of preferred equity investments	375			2,766			2,463			375
Investment in unconsolidated joint venture	(354,461		)	—			—			(354,461		)
Net proceeds from the sales of real estate	278,201			6,099			322,736			278,201

Net cash used in investing activities	(296,899		)	(6,341		)
Net cash provided by (used in) investing activities							317,882			(296,899		)
Cash flows from financing activities:
Net borrowings from revolving credit facility	35,000			6,000
Net (repayments of) borrowings from revolving credit facility							(349,000		)	35,000
Proceeds from issuance of senior unsecured notes							300,000			—
Principal payments on senior unsecured notes							(500,000		)	—
Principal payments on secured debt	(2,128		)	(2,049		)	(1,703		)	(2,128		)
Payments of deferred financing costs	(12		)	(124		)	(4,413		)	(12		)
Payments related to extinguishment of debt							(6,895		)	—
Distributions to noncontrolling interests	(72		)	—			(73		)	(72		)
Preferred stock redemption	(143,750		)	—			—			(143,750		)
Issuance of common stock, net	(499		)	(3,224		)	211,575			(499		)
Dividends paid on common and preferred stock	(164,736		)	(60,691		)	(161,735		)	(164,736		)

Net cash used in financing activities	(276,197		)	(60,088		)	(512,244		)	(276,197		)

Net decrease in cash, cash equivalents and restricted cash	(361,543		)	(12,147		)	(2,484		)	(361,543		)
Effect of foreign currency translation on cash, cash equivalents and restricted cash	(252		)	130			300			(252		)
Cash, cash equivalents and restricted cash, beginning of period	587,449			34,665			59,658			587,449

Cash, cash equivalents and restricted cash, end of period	$	225,654		$	22,648		$	57,474		$	225,654
Supplemental disclosure of cash flow information:
Interest paid	$	67,793		$	28,944		$	74,631		$	67,793

See accompanying notes to condensed consolidated financial statements.

SABRA HEALTH CARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. BUSINESS

Overview

Sabra Health Care REIT, Inc. (“Sabra” or the “Company”) was incorporated on May 10, 2010 as a wholly owned subsidiary of Sun Healthcare Group, Inc. (“Sun”) and commenced operations on November 15, 2010 following ~~Sabra's~~Sabra’s separation from Sun. Sabra elected to be treated as a real estate investment trust (“REIT”) with the filing of its United States (“U.S.”) federal income tax return for the taxable year beginning January 1, 2011. Sabra believes that it has been organized and operated, and it intends to continue to operate, in a manner to qualify as a REIT. Sabra’s primary business consists of acquiring, financing and owning real estate property to be leased to third-party tenants in the healthcare sector. Sabra primarily generates revenues by leasing properties to tenants and operators throughout the ~~United States~~U.S. and Canada. Sabra owns substantially all of its assets and properties and conducts its operations through Sabra Health Care Limited Partnership, a Delaware limited partnership (the “Operating Partnership”), of which Sabra is the sole general partner and ~~Sabra’s~~a wholly owned ~~subsidiaries are~~subsidiary of Sabra is currently the only limited ~~partners,~~partner, or by subsidiaries of the Operating Partnership. The Company’s investment portfolio is primarily comprised of skilled nursing/transitional care facilities, senior housing communities and specialty hospitals and other facilities, in each case leased to third-party operators; senior housing communities operated by third-party property managers pursuant to property management agreements (“Senior Housing - Managed”); investments in loans receivable; preferred equity investments; and an investment in an unconsolidated joint venture.

On ~~May 7,~~August 17, 2017, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) entered into by the Company, the Operating Partnership, PR Sub, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“Merger Sub”), Care Capital Properties, Inc., a Delaware corporation (“CCP”), and Care Capital Properties, L.P. (“CCPLP”), a Delaware limited partnership and wholly owned subsidiary of CCP, ~~entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, on August 17, 2017,~~ CCP merged with and into Merger Sub, with Merger Sub continuing as the surviving corporation (the “CCP Merger”), following which Merger Sub merged with and into the Company, with the Company continuing as the surviving entity (the “Subsequent Merger”), and, simultaneous with the Subsequent Merger, CCPLP merged with and into the Operating Partnership, with the Operating Partnership continuing as the surviving entity.

Pursuant to the Merger Agreement, as of the effective time of the CCP Merger, each share of CCP common stock, par value $0.01 per share, issued and outstanding immediately prior to the effective time of the CCP Merger (other than shares of CCP common stock owned directly by CCP, the Company or their respective subsidiaries, in each case not held on behalf of third parties) was converted into the right to receive 1.123 newly issued shares of Company common stock, par value $0.01 per share, plus cash in lieu of any fractional shares. See Note 3, “CCP Merger and Recent Real Estate Acquisitions” for additional information regarding the CCP Merger.

~~The acquisition of CCP has been reflected in the Company’s condensed consolidated financial statements since the effective date of the CCP Merger.~~

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Sabra and its wholly owned subsidiaries as of June 30, ~~2018~~2019 and December 31, ~~2017~~2018 and for the three and six month periods ended June 30, ~~2018~~2019 and ~~2017.~~2018. All significant intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair statement of the results for such periods. Operating results for the three and six months ended June 30, ~~2018~~2019 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2018~~2019. For further information, refer to the Company’s consolidated financial statements and notes thereto for the

year ended December 31, ~~2017~~2018 included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 filed with the SEC.

GAAP requires the Company to identify entities for which control is achieved through voting rights or other means and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). A VIE is broadly defined as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the entity’s activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or

(c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. If the Company were determined to be the primary beneficiary of the VIE, the Company would consolidate investments in the VIE. The Company may change its original assessment of a VIE due to events such as modifications of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposal of all or a portion of an interest held by the primary beneficiary.

The Company identifies the primary beneficiary of a VIE as the enterprise that has both: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. The Company performs this analysis on an ongoing basis.

As of June 30, ~~2018~~2019, the Company determined that it was the primary beneficiary of ~~two variable interest entities—~~one ~~exchange accommodation titleholder variable interest entity and~~ VIE—a joint venture variable interest entity owning one skilled nursing/transitional care facility—and has consolidated the operations of ~~these entities~~this entity in the accompanying condensed consolidated financial statements. As of June 30, ~~2018,~~2019, the Company determined that the operations of ~~these entities~~this entity were not material to the Company’s results of operations, financial condition or cash flows.

As it relates to investments in loans, in addition to the Company’s assessment of VIEs and whether the Company is the primary beneficiary of those VIEs, the Company evaluates the loan terms and other pertinent facts to determine whether the loan investment should be accounted for as a loan or as a real estate joint venture. If an investment has the characteristics of a real estate joint venture, including if the Company participates in the majority of the borrower’s expected residual profit, the Company would account for the investment as an investment in a real estate joint venture and not as a loan investment. Expected residual profit is defined as the amount of profit, whether called interest or another name, such as an equity kicker, above a reasonable amount of interest and fees expected to be earned by a lender. At June 30, ~~2018~~2019, none of the Company’s investments in loans ~~are~~were accounted for as real estate joint ventures.

As it relates to investments in joint ventures, the Company assesses any limited partners’ rights and their impact on the presumption of control of the limited partnership by any single partner. The Company also applies this guidance to managing member interests in limited liability companies. The Company reassesses its determination of which entity controls the joint venture if: there is a change to the terms or in the exercisability of the rights of any partners or members, the sole general partner or managing member increases or decreases its ownership interests, or there is an increase or decrease in the number of outstanding ownership interests. As of June 30, ~~2018,~~2019, the Company’s determination of which entity controls its investments in joint ventures has not changed as a result of any reassessment.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Reclassifications

Certain amounts in the Company’s condensed consolidated ~~financial~~ statements of income for prior periods have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations or stockholders’ equity of prior periods. ~~As a result, certain reclassifications were made to the condensed consolidated statements of income and condensed consolidated statements of cash flows.~~

Investment in Unconsolidated Joint Venture

The Company reports investments in unconsolidated entities over whose operating and financial policies it has the ability to exercise significant influence under the equity method of accounting. Under this method of accounting, the Company’s share of the investee’s earnings or losses is included in the Company’s condensed consolidated statements of income. The initial carrying value of the investment is based on the amount paid to purchase the joint venture interest. Differences between the Company’s cost basis and the basis reflected at the joint venture level are generally amortized over the lives of the related assets and liabilities, and such amortization is included in the Company’s share of earnings of the joint venture.

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its equity method investments may not be recoverable or realized. When indicators of potential impairment are identified, the Company evaluates its equity method investments for impairment based on a comparison of the fair value of the investment to its carrying value. The fair value is estimated based on discounted cash flows that include all estimated cash inflows and outflows over a specified holding period and any estimated debt premiums or discounts. If, based on this analysis, the Company does not believe that it will be able to recover the carrying value of its equity method investment, the Company would record an impairment loss to the extent that the carrying value exceeds the estimated fair value of its equity method investment.

On January 2, 2018, the Company completed its transaction with affiliates of Enlivant and TPG Real Estate, the real estate platform of TPG, and contributed $352.7 million, before closing costs, to acquire a 49% equity interest in an entity that ~~owns~~owned 172 senior housing communities managed by Enlivant (the “Enlivant Joint Venture”). At closing, the Enlivant Joint Venture had outstanding indebtedness of $791.3 million and net working capital of $22.9 ~~million, and the Company’s investment in the Enlivant Joint Venture implied an aggregate portfolio value of $1.49 billion.~~million. The joint venture agreement includes an option for the Company to acquire the remainder of the outstanding equity interests in the Enlivant Joint Venture by January 2, 2021 and grants the Company the right of first offer if the Company’s partner in the Enlivant Joint Venture desires to transfer its equity interest (which it may do commencing on January 2, 2020). ~~In addition,~~ Sabra also has the right to designate three directors on the seven member board of directors of the Enlivant Joint Venture and has other customary minority rights. During the six months ended June 30, 2019, the Enlivant Joint Venture sold two senior housing communities for gross proceeds of $6.3 million, and the Company recorded an aggregate net loss on sale of real estate related to unconsolidated joint venture of $1.7 million. As of June 30, ~~2018,~~2019, the book value of the Company’s investment in the Enlivant Joint Venture was ~~$349.0~~$328.2 million.

Net Investment in Direct Financing Lease

As of June 30, ~~2018,~~2019, the Company had a ~~$23.2~~$23.6 million net investment in one skilled nursing/transitional care facility leased to an operator under a direct financing lease, as the tenant is obligated to purchase the property at the end of the lease term. The net investment in direct financing lease is recorded in accounts receivable, prepaid expenses and other assets, net on the accompanying condensed consolidated balance sheets and represents the total undiscounted rental payments of $4.8 million, plus the estimated unguaranteed residual value of $24.7 million, less the unearned lease ~~income.~~income of $5.9 million as of June 30, 2019. Unearned lease income represents the excess of the minimum lease payments and residual value over the cost of the investment. Unearned lease income is deferred and amortized to income over the lease term to provide a constant yield when collectability of the lease payments is reasonably assured. Income from the Company’s net investment in direct financing lease was $0.7 million and $1.3 million for the three and six months ended June 30, 2019, respectively, and $0.6 million and $1.3 million for the three and six months ended June 30, 2018, respectively, and is reflected in interest and other income on the accompanying condensed consolidated statements of income. Future minimum lease payments contractually due under the direct financing lease at June 30, ~~2018,~~2019, were as follows: $1.1 million for the remainder of ~~2018; $2.2 million for~~ 2019; $2.3 million for 2020; and $2.1 million for 2021.

Recently Issued Accounting Standards Update

Adopted

Between May 2014 and February 2017, the FASB issued four Accounting Standards Updates (each, an “ASU”) changing the requirements for recognizing and reporting revenue (together, herein referred to as the “Revenue ASUs”): (i) ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), (ii) ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”), (iii) ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”) and (iv) ASU No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”). ASU 2014-09 provides guidance for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. ASU 2016-12 provides practical expedients and improvements on the previously narrow scope of ASU 2014-09. The Revenue ASUs became effective for the Company on January 1, 2018 with the Company electing to use the modified retrospective approach for its adoption. Further, the Company elected to reassess only contracts that were not completed as of the adoption date. The adoption of these ASUs did not have a material impact to beginning retained earnings as of January 1, 2018.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 provides specific guidance clarifying how certain cash receipts and payments should be classified. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The Company adopted ASU 2016-15 and ASU 2016-18 on January 1, 2018. The full retrospective approach of adoption is required for both ASUs and, accordingly, certain line items in the Company’s consolidated statements of cash flows have been reclassified to conform to the current period presentation. The following table illustrates changes in the Company’s cash flows as reported in the accompanying condensed consolidated statements of cash flows and as previously reported prior to the adoption (in thousands):

Six Months Ended June 30, 2017
As Reported As Previously Reported
Net cash provided by operating activities 54,282
53,871
Net decrease in balance (12,147 ) (12,558 )
Balance - beginning of the year 34,665
25,663
Balance - end of the year 22,648
13,235

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). ASU 2017-12 is intended to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and to simplify the application of the hedge accounting guidance in current GAAP. ASU 2017-12 is effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted. The Company adopted ASU 2017-12 effective beginning January 1, 2018. ASU 2017-12 requires a modified retrospective transition method in which the Company recognized the cumulative effect of the change on the opening balance of each affected component of equity in the condensed consolidated balance sheet as of the date of adoption, which resulted in a decrease to cumulative distributions in excess of net income and an increase to accumulated other comprehensive income of $0.8 million.

~~Issued but Not Yet Adopted~~

In February 2016, the FASB issued ~~ASU~~Accounting Standards Update (“ASU”) 2016-02, Leases, ~~(Topic 842)~~as amended by subsequent ASUs (“~~ASU 2016-02”~~Topic 842”). ~~ASU 2016-02~~Topic 842 supersedes guidance related to accounting for ~~leases. ASU 2016-02 updates guidance around~~leases and provides for the recognition of lease assets and lease liabilities by lessees for those leases previously classified as operating leases under ~~previous~~ GAAP. The objective of ~~ASU 2016-02~~Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing and uncertainty of cash flows arising from a lease. ~~ASU 2016-02~~Topic 842 does not fundamentally change lessor accounting; however, some changes have been made to lessor accounting to conform and align that guidance with the lessee guidance and other areas within GAAP. ~~ASU 2016-02~~Topic 842 is effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted. ~~Under ASU 2016-02, entities currently are required~~The Company elected to adopt ~~the new lease requirements~~Topic 842 on January 1, 2019 using athe modified retrospective transition method, ~~whereby an entity initially applies~~which permits application of the new ~~lease requirements (subject~~standard on the adoption date as opposed to ~~specific transition requirements and optional practical expedients) at the beginning of~~ the earliest comparative period presented in the financial statements. ~~Upon adoption of ASU 2016-02,~~In addition, the Company ~~will recognize~~elected to use the available practical expedient package, and therefore did not reassess classification of its ~~operating leases for which it is the lessee, mainly corporate office leases and ground leases, on its consolidated balance sheets. Further, as a result of adoption,~~existing leases.

Additionally, the Company ~~may be required to increase its revenue and expense for the amount of real estate taxes and insurance paid by its tenants under certain leasing arrangements with no net impact to net income.~~

~~In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements (“ASU 2018-11”) that allows lessors to elect, as~~has elected a practical expedient not to separate lease and nonlease components (such as services rendered) ~~in a contract for the purpose of revenue recognition and disclosure. The practical expedient~~, which can only be applied to leasing arrangements for which (i) the timing and pattern of transfer are the same for the lease and nonlease components and (ii) the lease component, if accounted for separately, would be classified as an operating lease. Under this practical expedient, contracts that are predominantly lease-based would be accounted for under Topic 842, and contracts that are predominantly service-based would be accounted for under Topic 606, Revenue from Contracts with Customers. ~~Further, ASU 2018-11 also provides for an additional (and optional) transition method to adopt the new lease requirements by allowing entities to initially apply the requirements by recognizing~~As a ~~cumulative-effect adjustment to the opening balance~~result of ~~retained earnings in the period of adoption. The Company plans to elect~~electing this practical expedient, the Company, beginning January 1, 2019, recognizes revenue from its leased skilled nursing/transitional care facilities, senior housing communities, and ~~apply~~specialty hospitals and other

facilities under Topic 842 and recognizes revenue from its Senior Housing - Managed communities under the ~~optional transition method for~~Revenue ASUs (codified under Topic 606). Upon adoption of Topic 842, the Company recognized its operating leases for which ~~the Company~~it is the lessee, ~~using~~mainly its corporate office lease and ground leases, on its consolidated balance sheets, as a lease liability of $10.0 million, included in accounts payable and accrued liabilities on the ~~cumulative-effect adjustment~~condensed consolidated balance sheets, and a corresponding right-of-use asset, included in accounts receivable, prepaid expenses and other assets, net on the condensed consolidated balance sheets. As of June 30, 2019, the balances of the lease liability and the corresponding right-of-use asset were $9.8 million and $9.5 million, respectively.

The Company assesses the collectability of rental revenues on a lease-by-lease basis. Prior to the ~~opening balance sheet~~adoption of Topic 842, the Company recorded rental revenue and receivables to the extent those amounts were expected to be collected, irrespective of the Company’s determination of the collectability of substantially all rents over the life of a lease. Upon adoption of Topic 842, if at any time the Company cannot determine that it is probable that substantially all rents over the life of a lease are collectible, rental revenue will be recognized only to the extent of payments received and all receivables associated with the lease will be written off irrespective of amounts expected to be collectible. Upon adoption of Topic 842 and as ~~of January 1, 2019. The Company is still evaluating the full impact~~ of the adoption date, the Company recorded a $32.5 million reduction in equity and accounts receivable due to the cumulative effect of ~~ASU 2016-02 on January 1,~~this change. This reduction consisted of $17.5 million of straight-line rental income receivables and $15.0 million of cash rent receivables, although management believes the $15.0 million of cash rent receivables are collectible. Any recoveries of these amounts will be recorded in future periods upon receipt of payment. Under Topic 842, future write-offs of receivables and any recoveries of previously written-off receivables will be recorded as adjustments to rental revenue.

Furthermore, Topic 842 requires lessors to exclude from variable payments lessor costs paid by lessees directly to third parties. In contrast, lessor costs that are paid by the lessor and reimbursed by the lessee are included in the measurement of variable lease revenue and the associated expense. As a result, the Company recognized $4.8 million and $9.0 million of variable lease revenue and the associated expense during the three and six months ended June 30, 2019, ~~to its consolidated financial statements.~~respectively.

Issued but Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires that a financial asset (or a group of financial assets) measured at amortized cost basis be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The amendments in ASU 2016-13 are an improvement because they eliminate the probable initial recognition threshold inunder current GAAP and, instead, reflect an entity’s current estimate of all expected credit losses. Previously, when credit losses were measured under GAAP, an entity generally only considered past events and current conditions in measuring the incurred loss. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses (“ASU 2018-19”), which amends ASU 2016-13 isto clarify that receivables arising from operating leases are not within the scope of Subtopic 326-20, and instead, impairment of such receivables should be accounted for in accordance with Topic 842, Leases. ASU 2016-13 and ASU 2018-19 are effective for fiscal years and interim periods within those years beginning after December 15, 2019, with early adoption permitted as of the fiscal years beginning after December 15, 2018. An entity will apply the amendments in ~~this update~~these updates through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). The Company is currently evaluating the impact this guidance will have on its consolidated financial statements when adopted.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 updates the fair value measurement disclosure requirements by (i) eliminating certain requirements, including disclosure of the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements, (ii) modifying certain requirements, including clarifying that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date and (iii) adding certain requirements, including disclosure of the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 is effective for fiscal years and interim periods within those years beginning after December 15, 2019, with early adoption permitted for any eliminated or modified disclosures. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements when adopted.

3. ~~CCP MERGER AND~~ RECENT REAL ESTATE ACQUISITIONS

~~CCP Merger~~

~~On August 17, 2017,~~No acquisitions were completed during the Company completed the CCP Merger. Under the terms of the Merger Agreement, each share of CCP common stock issued and outstanding immediately prior to the effective time of the CCP Merger (other than any shares owned directly by CCP, the Company or their respective subsidiaries, in each case not held on behalf of third parties) was converted into the right to receive 1.123 newly issued shares of Company common stock, resulting in the issuance of approximately 94.0 million shares of Company common stock at the effective time of the CCP Merger. As a result of the CCP Merger, the Company acquired 330 properties (consisting of 296 skilled nursing/transitional care facilities, 13 senior housing communities and 21 specialty hospitals and other facilities), one skilled nursing/transitional care facility leased to an operator under a direct financing lease (see Note 2, “Summary of Significant Accounting Policies—Net Investment in Direct Financing Lease”), 18 investments in loans receivable (see Note 6, “Loans Receivable and Other Investments”) and one specialty valuation firm that was subsequently sold in March 2018. Sabra also assumed certain outstanding equity awards and other debt and liabilities of CCP (see Note 7, “Debt”). Based on the closing price of Sabra’s common stock on August 16, 2017, the Company estimates the fair value of the consideration exchanged or assumed to be approximately $2.1 billion.

The following table summarizes the purchase price allocation for the CCP Merger based on the Company’s valuation, including estimates and assumptions of the acquisition date fair value of the tangible and intangible assets acquired and liabilities assumed on August 17, 2017 (in thousands):

Real estate investments $ 3,727,310
Loans receivable and other investments 58,244
Cash and cash equivalents 77,859
Restricted cash 779
Lease intangible assets, net 145,786
Accounts receivable, prepaid expenses and other assets, net 35,873
Secured debt, net (98,500 )
Revolving credit facility (362,000 )
Unsecured term loans (674,000 )
Senior unsecured notes, net (616,873 )
Accounts payable and accrued liabilities (134,802 )
Lease intangible liabilities, net (102,643 )
Noncontrolling interests (4,455 )
Total consideration $ 2,052,578

The lease intangible assets and lease intangible liabilities acquired in connection with the CCP Merger have weighted-average amortization periods as of the closing date of the CCP Merger of 10 years.

~~Recent Real Estate Acquisitions~~

six months ended June 30, 2019. During the six months ended June 30, 2018, the Company acquired 11 Senior Housing - Managed communities, five senior housing communities and two skilled nursing/transitional care facilities. ~~During the six months ended June 30, 2017, the Company acquired one senior housing community.~~ The consideration was allocated ~~based on certain valuations and analyses. Certain valuations and analyses related to~~as follows (in thousands):



	Six Months Ended
	June 30, 2018
Land	$	24,356
Building and improvements	187,903
Tenant origination and absorption costs intangible assets	1,312
Tenant relationship intangible assets	412

Total consideration	$	213,983

For the acquisitions completed during the six months ended June 30, 2018, ~~have yet to be finalized, and accordingly,~~ the ~~allocations are subject to adjustment once the analyses are completed. Allocation of the consideration is as follows (in thousands):~~

Six Months Ended June 30,
2018 2017
Land $ 24,356
$ 1,034
Building and improvements 187,903
13,128
Tenant origination and absorption costs intangible assets 1,312
223
Tenant relationship intangible assets 412
71

Total consideration $ 213,983
$ 14,456

~~The~~ tenant origination and absorption costs intangible assets and tenant relationship intangible assets ~~acquired in connection with these acquisitions have~~had weighted-average amortization periods as of the respective dates of acquisition of 13 years and 22 years, ~~respectively, for acquisitions completed during the six months ended June 30, 2018, and 15 years and 25 years, respectively, for the acquisition completed during the six months ended June 30, 2017.~~respectively.

For the three and six months ended June 30, 2018, the Company recognized $10.7 million and $20.4 million of total revenues, respectively, and $1.6 million and $2.5 million of net income attributable to common stockholders, respectively, from the facilities acquired during the six months ended June 30, 2018. For both the three and six months ended June 30, 2017, the Company recognized $0.1 million of total revenues and net income attributable to common stockholders from the facility acquired during the six months ended June 30, 2017.

4. REAL ESTATE PROPERTIES HELD FOR INVESTMENT

The Company’s real estate properties held for investment consisted of the following (dollars in thousands):

As of June 30, ~~2018~~2019


Property Type	Number of Properties	Number of Beds/Units	Total Real Estate at Cost		Accumulated Depreciation			Total Real Estate Investments, Net		Number of Properties	Number of Beds/Units	Total Real Estate at Cost		Accumulated Depreciation			Total Real Estate Investments, Net
Skilled Nursing/Transitional Care	352	40,077	$	4,242,748	$	(223,777	)	$	4,018,971	304	33,879	$	3,712,541	$	(259,872	)	$	3,452,669
Senior Housing - Leased(1)	89	7,156	1,200,923		(113,020		)	1,087,903		62	4,011	646,092		(70,563		)	575,529
Senior Housing - Managed(1)	24	1,712	308,221		(15,961		)	292,260		44	4,470	863,341		(94,969		)	768,372
Specialty Hospitals and Other	22	1,085	618,316		(24,109		)	594,207		22	1,085	621,236		(39,226		)	582,010
	487	50,030	6,370,208		(376,867		)	5,993,341		432	43,445	5,843,210		(464,630		)	5,378,580
Corporate Level			633		(292		)	341				634		(340		)	294
			$	6,370,841	$	(377,159	)	$	5,993,682			$	5,843,844	$	(464,970	)	$	5,378,874

As of December 31, ~~2017~~2018


Property Type	Number of Properties	Number of Beds/Units	Total Real Estate at Cost		Accumulated Depreciation			Total Real Estate Investments, Net		Number of Properties	Number of Beds/Units	Total Real Estate at Cost		Accumulated Depreciation			Total Real Estate Investments, Net
Skilled Nursing/Transitional Care	384	43,223	$	4,364,387	$	(209,039	)	$	4,155,348	335	37,628	$	4,094,484	$	(224,942	)	$	3,869,542
Senior Housing - Leased(1)	88	8,137	1,166,687		(102,370		)	1,064,317		90	7,332	1,237,790		(125,902		)	1,111,888
Senior Housing - Managed(1)	13	1,113	189,120		(12,125		)	176,995		23	1,603	301,739		(19,537		)	282,202
Specialty Hospitals and Other	22	1,085	614,068		(16,620		)	597,448		22	1,085	621,236		(31,640		)	589,596
	507	53,558	6,334,262		(340,154		)	5,994,108		470	47,648	6,255,249		(402,021		)	5,853,228
Corporate Level			593		(269		)	324				634		(317		)	317
			$	6,334,855	$	(340,423	)	$	5,994,432			$	6,255,883	$	(402,338	)	$	5,853,545

⁽¹⁾ During the six months ended June 30, 2019, the Company transitioned 21 senior housing communities to its Senior Housing - Managed portfolio.



	June 30, 2019			December 31, 2018
Building and improvements	$	5,017,138		$	5,388,102
Furniture and equipment	233,775			237,145
Land improvements	1,398			1,254
Land	591,533			629,382
	5,843,844			6,255,883
Accumulated depreciation	(464,970		)	(402,338		)
	$	5,378,874		$	5,853,545

June 30, 2018 December 31, 2017
Building and improvements $ 5,489,087
$ 5,449,415
Furniture and equipment 236,838
232,889
Land improvements 1,971
3,456
Land 642,945
649,095
6,370,841
6,334,855
Accumulated depreciation (377,159 ) (340,423 )
$ 5,993,682
$ 5,994,432

Operating Leases

As of June 30, ~~2018~~2019, the substantial majority of the Company’s real estate properties (excluding 2444 Senior Housing - Managed communities) were leased under triple-net operating leases with expirations ranging from less than one year to 1514 years. As of June 30, ~~2018~~2019, the leases had a weighted-average remaining term of ~~nine~~eight years. The leases generally include provisions to extend the lease terms and other negotiated terms and conditions. The Company, through its subsidiaries, retains substantially all of the risks and benefits of ownership of the real estate assets leased to the tenants. The Company may receive additional security under these operating leases in the form of letters of credit and security deposits from the lessee or guarantees from the parent of the lessee. Security deposits received in cash related to tenant leases are included in accounts payable and accrued liabilities on the accompanying condensed consolidated balance sheets and totaled $~~17.9~~10.8 million and ~~$20.3~~$12.4 million as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, and letters of credit deposited with the Company totaled approximately ~~$90~~$78 million and ~~$96~~$98 million as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. In addition, ~~our~~the Company’s tenants have deposited with the Company ~~$28.0~~$15.0 million and ~~$28.3~~$17.5 million as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, for future real estate taxes, insurance expenditures and tenant improvements related to ~~our~~the Company’s properties and their operations.

AsOn February 15, 2019, the Company entered into a settlement agreement with Senior Care Centers in connection with the notices of default and lease termination issued by the Company to Senior Care Centers during the third quarter of 2018. In accordance with the order entered by the bankruptcy court in March 2019, the settlement agreement provided for the discharge by the Company of its claims against Senior Care Centers in exchange for $9.5 million of settlement payments, a portion of which was applied to pay post-petition rent. The Company recorded $0.5 million and $6.2 million of such post-petition rent during the three and six months ended June 30, ~~2018,~~2019, respectively. On April 1, 2019, the Company ~~had a $1.1 million reserve for unpaid cash rental income~~completed the sale of 28 facilities (26 skilled nursing/transitional care facilities and ~~a $3.2 million reserve associated~~two senior housing communities) previously operated by Senior Care Centers and received gross sales proceeds of $282.5 million. In connection with ~~accumulated straight-line rental income. As of December 31, 2017,~~the sale, the Company ~~had a $3.2 million reserve for unpaid cash rental income and a $12.4 million reserve associated with accumulated straight-line rental income.~~

~~The Company has~~ entered into ~~memoranda~~an agreement to indemnify the buyer from certain costs, expenses and liabilities related to the historical operations of ~~understanding with Genesis to market for sale up to all of its remaining Genesis~~the facilities ~~and to restructure its lease agreements with Genesis to increase~~by Senior Care Centers. In May 2019, the ~~marketability of these~~Company transitioned eight facilities ~~to potential buyers. Effective January 1, 2018, the annual base rent payable under the Genesis leases was reduced~~previously operated by ~~$19.0 million pursuant~~Senior Care Centers to a ~~lease restructuring agreement.~~current operator in the Sabra portfolio, and the Company expects to sell the remaining two facilities operated by Senior Care Centers. During the six months ended June 30, 2019, the Company recorded an impairment charge of $92.2 million related to the Senior Care Centers facilities, which includes $10.2 million related to the Company’s estimated contractual indemnification obligations.

On December 19, 2018, the Company entered into a letter of intent to terminate its triple-net master lease with Holiday Retirement (“Holiday”) with respect to all 21 senior housing communities subject to the master lease (the “Holiday Communities”) and concurrently enter into management agreements pursuant to which Holiday would manage the Holiday Communities. On April 1, 2019, the Company completed the ~~sale~~conversion of ~~27 facilities leased~~the Holiday Communities to ~~Genesis~~its Senior Housing - Managed portfolio and ~~expects~~recognized lease termination income of $66.9 million, which includes a $57.2 million lease termination payment received in exchange for terminating the Holiday master lease and a $9.7 million gain related to ~~complete~~ the ~~sale~~assumption of 19fixed assets net of ~~its remaining 27 Genesis facilities during the remainder of 2018 and to retain eight facilities, although it cannot provide assurance that the sales will be completed in that timeframe, if at all.~~liabilities.

The Company monitors the creditworthiness of its tenants by reviewing credit ratings (if available) and evaluating the ability of the tenants to meet their lease obligations to the Company based on the tenants’ financial performance, including the evaluation of any parent guarantees (or the guarantees of other related parties) of tenant lease obligations. As formal credit ratings may not be available for most of the Company’s tenants, the primary basis for the Company’s evaluation of the credit quality of its tenants (and more specifically the tenant’s ability to pay their rent obligations to the Company) is the tenant’s lease coverage ratio or the parent’s fixed charge coverage ratio for those entities with a parent guarantee. These coverage ratios include earnings before interest, taxes, depreciation, amortization and rent (“EBITDAR”) to rent and earnings before interest,

taxes, depreciation, amortization, rent and management fees (“EBITDARM”) to rent at the lease level and consolidated EBITDAR to total fixed charges at the parent guarantor level when such a guarantee exists. The Company obtains various financial and operational information from its tenants each month and reviews this information in conjunction with the ~~above-described~~above-

described coverage metrics to identify financial and operational trends, evaluate the impact of the industry’s operational and financial environment (including the impact of government reimbursement), and evaluate the management of the tenant’s operations. These metrics help the Company identify potential areas of concern relative to its tenants’ credit quality and ultimately the tenant’s ability to generate sufficient liquidity to meet its obligations, including its obligation to continue to pay the rent due to the Company.

For ~~both~~ the three and six months ended June 30, ~~2018,~~2019, no tenant relationship represented 10% or more of the Company’s total revenues.

~~As of~~ ~~June 30, 2018, the~~The future minimum rental payments from the Company’s properties held for investment under non-cancelable operating leases were as follows (in thousands):

July 1 through December 31, 2018 $ 260,307
2019 529,844
2020 522,304
2021 520,553
2022 512,680
Thereafter 3,083,776
$ 5,429,464

~~5. ASSET HELD FOR SALE AND DISPOSITIONS~~

~~Asset Held for Sale~~

As of June 30, 2019



July 1 through December 31, 2019	$	217,991
2020	423,770
2021	420,407
2022	396,598
2023	378,439
Thereafter	2,007,117
	$	3,844,322

As of December 31, 2018



2019	$	465,766
2020	456,207
2021	452,346
2022	454,216
2023	437,277
Thereafter	2,407,064
	$	4,672,876

Senior Housing - Managed Communities

The Company’s Senior Housing - Managed communities offer residents certain ancillary services that are not contemplated in the lease with each resident (i.e., housekeeping, laundry, guest meals, etc.). These services are provided and paid for in addition to the standard services included in each resident lease (i.e., room and board, standard meals, etc.). The Company bills residents for ancillary services one month in arrears and recognizes revenue as the services are provided, as the Company ~~determined that one~~has no continuing performance obligation related to those services. Resident fees and services includes ancillary service revenue of $0.2 million and $0.3 million for the three and six months ended June 30, 2019, respectively, and $0.1 million and $0.2 million for the three and six months ended June 30, 2018, respectively.

5. IMPAIRMENT OF REAL ESTATE AND DISPOSITIONS

2019

Impairment of Real Estate

During the six months ended June 30, 2019, the Company recognized a $105.1 million real estate impairment, of which amount $92.2 million related to the 28 Senior Care Centers facilities sold on April 1, 2019 and three additional Senior Care Centers facilities, and the remaining $12.9 million related to four additional skilled nursing/transitional care ~~facility, with a~~facilities.

Dispositions

During the six months ended June 30, 2019, the Company completed the sale of 31 skilled nursing/transitional care facilities and seven senior housing communities for aggregate consideration, net ~~book~~of closing costs, of $315.0 million. The net carrying value of ~~$6.0~~the assets and liabilities of these facilities was $313.8 million, ~~met~~which resulted in an aggregate $1.2 million net gain on sale.

Excluding the ~~criteria to be classified as held for sale.~~net gain on sale and real estate impairment, the Company recognized $3.1 million and $18.0 million of net income during the six months ended June 30, 2019 and 2018, respectively, from these facilities. The ~~net book value is included in accounts receivable, prepaid expenses and other assets, net~~sale of these facilities does not represent a strategic shift that has or will have a major effect on the ~~condensed consolidated balance sheets. The facility was~~Company’s operations and financial results, and therefore the results of operations attributable to these facilities have remained in continuing operations.

2018

Impairment of Real Estate

During the six months ended June 30, 2018, the Company recognized a $1.4 million real estate impairment, of which $0.5 million related to one senior housing community sold ~~on July 2, 2018 for a gross sales price of $7.0 million.~~during the period.

~~2018~~ Dispositions

During the six months ended June 30, 2018, the Company completed the sale of 33 skilled nursing/transitional care facilities and four senior housing communities for aggregate consideration, net of closing costs, of $278.3 million. The net carrying value of the assets and liabilities of these facilities was $135.8 million, which resulted in an aggregate $142.5 million net gain on sale. The Company also recognized an additional $0.1 million of ~~additional~~ selling expenses for sales completed in 2017.

~~During the six months ended June 30, 2018, the Company recognized a $1.4 million real estate impairment, of which $0.5 million related to one senior housing community sold during the period.~~

Excluding the net gain on sale and real estate impairment, the Company recognized $11.6 million and $15.4 million of net income during the six months ended June 30, 2018 and 2017 ~~respectively,~~ from these facilities. The sale of these facilities does not represent a strategic shift that has or will have a major effect on the Company’s operations and financial results, and therefore the results of operations attributable to these facilities have remained in continuing operations.

~~2017 Disposition~~

During the six months ended June 30, 2017, the Company completed the sale of one skilled nursing/transitional care facility for consideration, net of closing costs, of $6.1 million. The net carrying value of the assets and liabilities of this facility was $2.1 million, which resulted in a $4.0 million net gain on sale.

Excluding the net gain on sale, the Company recognized $0.1 million of net income during the six months ended June 30, 2017 from this facility. The sale of this facility does not represent a strategic shift that has or will have a major effect on the Company’s operations and financial results, and therefore the results of operations attributable to this facility have remained in continuing operations.

6. LOANS RECEIVABLE AND OTHER INVESTMENTS

As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company’s loans receivable and other investments consisted of the following (dollars in thousands):



											June 30, 2019
Investment	Quantity as of June 30, 2019	Property Type	Principal Balance as of June 30, 2019 ⁽¹⁾		Book Value as of June 30, 2019			Book Value as of December 31, 2018			Weighted Average Contractual Interest Rate / Rate of Return		Weighted Average Annualized Effective Interest Rate / Rate of Return		Maturity Date as of June 30, 2019
Loans Receivable:
Mortgage	1	Specialty Hospital	$	19,000	$	19,000		$	18,577		10.0	%	10.0	%	01/31/27
Construction	2	Senior Housing	5,363		5,418			4,629			8.0	%	7.7	%	04/30/21- 09/30/22
Mezzanine	—	Skilled Nursing	—		—			2,188			N/A		N/A		N/A
Other	17	Multiple	48,365		44,418			45,324			6.8	%	7.3	%	02/28/19- 08/31/28

	20		72,728		68,836			70,718			7.7	%	8.1	%

Loan loss reserve			—		(1,960		)	(1,258		)

			$	72,728	$	66,876		$	69,460
Other Investments:
Preferred Equity	9	Skilled Nursing / Senior Housing	43,915		44,327			44,262			12.0	%	12.0	%	N/A

Total	29		$	116,643	$	111,203		$	113,722		9.3	%	9.6	%

June 30, 2018
Investment
Quantity
as of
June 30, 2018
Property Type
Principal Balance
as of
June 30,
2018 ⁽¹⁾

Book Value
as of
June 30, 2018

Book Value
as of
December 31, 2017
Weighted Average Contractual Interest Rate / Rate of Return Weighted Average Annualized Effective Interest Rate / Rate of Return
Maturity Date
as of
June 30, 2018
Loans Receivable:
Mortgage 1
Specialty Hospital $ 15,332
$ 15,332
$ 12,351
10.0 % 10.0 % 01/31/27
Construction 2
Senior Housing 3,989
4,055
2,733
8.0 % 7.8 % 04/30/21- 09/30/22
Mezzanine 1
Skilled Nursing 25,000
2,301
10,239
10.0 % 41.9 % 05/25/20
Pre-development 1
Senior Housing 2,357
2,357
2,357
9.0 % 8.4 % 04/01/20
Other 17
Multiple 34,009
32,191
38,324
8.5 % 9.7 % 12/31/17- 04/30/27

22
80,687
56,236
66,004
9.3 % 10.9 %

Loan loss reserve —
(356 ) (97 )

$ 80,687
$ 55,880
$ 65,907

Other Investments:
Preferred Equity 13
Skilled Nursing / Senior Housing 50,856
51,348
48,483
12.6 % 12.6 % N/A

Total 35
$ 131,543
$ 107,228
$ 114,390
10.6 % 11.7 %


⁽¹⁾	Principal balance includes amounts funded and accrued but unpaid interest / preferred return and excludes capitalizable fees.

~~In connection with the CCP Merger,~~

As of June 30, 2019 and December 31, 2018, the Company ~~acquired 18~~had six and seven loans receivable investments, respectively, with aan aggregate principal balance of ~~$83.3~~$3.1 million and ~~fair value of $58.2~~$27.7 million, ~~as of August 17, 2017.~~

~~Of the loans acquired in connection with the CCP Merger, eight loans receivable investments with a principal balance of $36.3 million~~respectively, that were considered to have deteriorated credit quality. As of June 30, 2019 and December 31, 2018, the book value of the outstanding loans with deteriorated credit quality ~~and based on the collateral or expected cash flows, the fair value~~ was ~~determined to be $11.3~~$1.5 million and ~~the accretable yield was $3.5~~$4.2 million, ~~as of August 17, 2017.~~respectively. During the six months ended June 30, ~~2018,~~2019, one loan with deteriorated credit quality was ~~repaid in full. As of June 30, 2018 and December 31, 2017, the book value of these loans was $4.8 million and $10.0 million, respectively.~~repaid.

The following table presents changes in the accretable yield for the three and six months ended June 30, 2019 and 2018 (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Accretable yield, beginning of period	$	198		$	1,883		$	449		$	2,483
Accretion recognized in earnings	(86		)	(1,529		)	(304		)	(2,129		)
Reduction due to payoff	—			—			(33		)	—
Net reclassification from nonaccretable difference	—			727			—			727
Accretable yield, end of period	$	112		$	1,081		$	112		$	1,081

Three Months Ended Six Months Ended
June 30, 2018
Accretable yield, beginning of period $ 1,883
$ 2,483
Accretion recognized in earnings (1,529 ) (2,129 )
Net reclassification from nonaccretable difference 727
727
Accretable yield, end of period $ 1,081
$ 1,081

During the three months ended June 30, 2019, the Company recorded no provision for specific loan losses, and during the six months ended June 30, 2019, the Company recorded a $1.2 million provision for specific loan losses. During each of the three and six months ended June 30, 2019, the Company increased its portfolio-based loan loss reserve by $0.2 million.

As of June 30, 2019, the Company had a $1.3 million specific loan loss reserve and a $0.7 million portfolio-based loan loss reserve. As of June 30, 2019, the Company considered one loan receivable investment to be impaired, which had a principal balance of $4.3 million as of each of June 30, 2019 and December 31, 2018. As of June 30, 2019, three loans receivable investments with an aggregate book value of $4.3 million were on nonaccrual status. As of June 30, 2019, the Company did not consider any preferred equity investments to be impaired, and no preferred equity investments were on nonaccrual status.

As of December 31, 2018, the Company had a $0.7 million specific loan loss reserve and a $0.6 million portfolio-based loan loss reserve. As of December 31, 2018, the Company considered one loan receivable investment with a principal balance of $1.3 million to be impaired, and two loans receivable investments with an aggregate book value of $1.3 million were on nonaccrual status. Additionally, as of December 31, 2018, the Company recognized interest income related to one loan receivable investment, with a book value of $4.3 million, that was more than 90 days past due. As of December 31, 2018, the Company did not consider any preferred equity investments to be impaired, and no preferred equity investments were on nonaccrual status.

During the three and six months ended June 30, 2018, the Company recorded no provision for specific loan losses and increased its portfolio-based loan loss reserve by $0.2 million and $0.3 million, respectively.

As of June 30, 2018, the Company had no specific loan loss reserve, and the portfolio-based loan loss reserve was $0.4 million. As of June 30, 2018, the Company did not consider any loans receivable investments to be impaired, and one loan receivable with a book value of $0 and three preferred equity investments totaling $14.5 million were on nonaccrual status. Additionally, as of June 30, 2018, the Company recognized interest income related to four loans receivable, with an aggregate book value of $10.6 million, that were more than 90 days past due.

As of December 31, 2017, the Company had no specific loan loss reserve, and the portfolio-based loan loss reserve was $0.1 million. As of December 31, 2017, the Company did not consider any loans receivable investments to be impaired, and one loan receivable with a book value of $0 was on nonaccrual status.

During the three and six months ended June 30, 2017, the Company recorded a provision for specific loan losses of $0.3 million and $1.8 million, respectively, related to five loans receivable investments, two of which were written-off during the three months ended June 30, 2017, and reduced its portfolio-based loan loss reserve by $0.1 million and $0.2 million, respectively.

7. DEBT

Secured Indebtedness

The Company’s secured debt consists of the following (dollars in thousands):


Interest Rate Type	Principal Balance as of June 30, 2018 ⁽¹⁾		Principal Balance as of December 31, 2017⁽¹⁾		Weighted Average Effective Interest Rate at June 30, 2018 ⁽²⁾		Maturity Date	Principal Balance as of June 30, 2019 ⁽¹⁾		Principal Balance as of December 31, 2018⁽¹⁾		Weighted Average Effective Interest Rate at June 30, 2019 ⁽²⁾		Maturity Date
Fixed Rate	$	157,781	$	160,702	3.87	%	December 2021 - August 2051	$	116,421	$	117,464	3.67	%	December 2021 - August 2051
Variable Rate	98,500		98,500		3.89	%	July 2019
	$	256,281	$	259,202	3.88	%


⁽¹⁾	Principal balance does not include deferred financing costs, net of ~~$2.7~~$1.7 million and ~~$2.8~~$1.8 million as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.


⁽²⁾	Weighted average effective interest rate includes private mortgage insurance.

On August 17, 2017, in connection with the CCP Merger (see Note 3, “CCP Merger and Recent Real Estate Acquisitions”), the Company assumed a $98.5 million variable rate secured term loan that bears interest at LIBOR plus 1.80% and matures in July 2019.

Senior Unsecured Notes

The Company’s senior unsecured notes consist of the following (dollars in thousands):



		Principal Balance as of
Title	Maturity Date	June 30, 2019 ⁽¹⁾		December 31, 2018 ⁽¹⁾

5.5% senior unsecured notes due 2021 (“2021 Notes”)	February 1, 2021	$	—	$	500,000
5.375% senior unsecured notes due 2023 (“2023 Notes”)	June 1, 2023	200,000		200,000
4.80% senior unsecured notes due 2024 (“2024 Notes”)	June 1, 2024	300,000		—
5.125% senior unsecured notes due 2026 (“2026 Notes”)	August 15, 2026	500,000		500,000
5.38% senior unsecured notes due 2027 (“2027 Notes”)	May 17, 2027	100,000		100,000
		$	1,100,000	$	1,300,000

Principal Balance as of
Title Maturity Date
June 30, 2018 ⁽¹⁾

December 31, 2017 ⁽¹⁾

5.5% senior unsecured notes due 2021 (“2021 Notes”)

February 1, 2021 $ 500,000
$ 500,000
5.375% senior unsecured notes due 2023 (“2023 Notes”)

June 1, 2023 200,000
200,000
5.125% senior unsecured notes due 2026 (“2026 Notes”) August 15, 2026 500,000
500,000
5.38% senior unsecured notes due 2027 (“2027 Notes”) May 17, 2027 100,000
100,000
$ 1,300,000
$ 1,300,000


⁽¹⁾	Principal balance does not include premium, net of ~~$15.2~~$14.0 million and deferred financing costs, net of ~~$8.4~~$7.5 million as of June 30, ~~2018~~2019 and does not include premium, net of ~~$15.9~~$14.5 million and deferred financing costs, net of ~~$9.6~~$7.1 million as of December 31, ~~2017.~~2018.

The ~~2021 Notes and the~~ 2023 Notes were issued by the Operating Partnership and Sabra Capital Corporation, wholly owned subsidiaries of the Company (the “Issuers”). The ~~2021 Notes accrue interest at a rate of 5.5% per annum payable semiannually on February 1 and August 1 of each year, and the~~ 2023 Notes accrue interest at a rate of 5.375% per annum payable semiannually on June 1 and December 1 of each year.

On May 29, 2019, the Issuers completed an underwritten public offering of $300.0 million aggregate principal amount of 2024 Notes. The net proceeds were $295.3 million after deducting underwriting discounts and other offering expenses. The net proceeds, together with borrowings under the Revolving Credit Facility (as defined below), were used to redeem the 2021 Notes as discussed below. The 2024 Notes accrue interest at a rate of 4.80% per annum payable semiannually on June 1 and December 1 of each year. The 2024 Notes are redeemable at the option of the Issuers, in whole or in part at any time and from time to time, prior to May 1, 2024, at a price equal to 100% of the principal amount, together with any accrued and unpaid interest to, but not including, the redemption date, plus a “make-whole” premium. The Issuers may also redeem the 2024 Notes on or after May 1, 2024, at a price equal to 100% of the principal amount, together with any accrued and unpaid interest to, but not including, the redemption date. Assuming the 2024 Notes are not redeemed, the 2024 Notes mature on June 1, 2024.

Additionally, on May 29, 2019, the Issuers issued a notice of redemption for all $500.0 million aggregate principal amount outstanding of the 2021 Notes. On June 29, 2019, the Company redeemed the 2021 Notes at a cash redemption price of 101.375% of the principal amount being redeemed, plus accrued and unpaid interest. The redemption resulted in $10.1 million of redemption related costs and write-offs for the three and six months ended June 30, 2019, including $6.9 million in payments made to noteholders and legal fees for early redemption and $3.2 million of write-offs associated with unamortized deferred financing and premium costs. These amounts are included in loss on extinguishment of debt on the accompanying condensed consolidated statements of income.

The 2026 Notes and the 2027 Notes were assumed as a result of the CCP Merger ~~(see Note 3, “CCP Merger and Recent Real Estate Acquisitions”)~~ and accrue interest at a rate of 5.125% and 5.38%, respectively, per annum. Interest is payable semiannually on February 15 and August 15 of each year for the 2026 Notes and on May 17 and November 17 of each year for the 2027 Notes.

The obligations under the ~~2021~~2023 Notes, ~~2023~~2024 Notes and 2027 Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by Sabra and certain subsidiaries of Sabra; provided, however, that such guarantees are subject to release under certain customary circumstances. The obligations under the 2026 Notes are fully and unconditionally guaranteed, on an unsecured basis, by Sabra; provided, however, that such guarantee is subject to release under certain customary circumstances. See Note 12, “Summarized Condensed Consolidating Information” for additional information

concerning the circumstances pursuant to which the guarantors will be automatically and unconditionally released from their obligations under the guarantees.

The indentures and agreements (the “Senior Notes Indentures”) governing the ~~2021~~2023 Notes, ~~2023~~2024 Notes, 2026 Notes and 2027 Notes (collectively, the “Senior Notes”) include customary events of default and require the Company to comply with specified restrictive covenants. As of June 30, ~~2018,~~2019, the Company was in compliance with all applicable financial covenants under the Senior Notes Indentures.

Credit Facility

Effective on August 17, 2017, the Operating Partnership and Sabra Canadian Holdings, LLC (together, the “Borrowers”), Sabra and the other parties thereto entered into a fourth amended and restated unsecured credit facility (the “Credit Facility”). The Credit Facility amends and restates the prior credit facility entered into by the Borrowers in January 2016 (the “Prior Credit Facility”). The Company recognized a $0.6 million loss on extinguishment of debt related to write-offs of deferred financing costs in connection with amending and restating the Prior Credit Facility.

The Credit Facility includes a $1.0 billion revolving credit facility (the “Revolving Credit Facility”), $1.1 billion in U.S. dollar term loans and a CAD $125.0 million Canadian dollar term loan (collectively, the “Term Loans”). Further, up to $175.0 million of the Revolving Credit Facility may be used for borrowings in certain foreign currencies. The Credit Facility also contains an accordion feature that can increase the total available borrowings to $2.5 billion, subject to terms and conditions.

The Revolving Credit Facility has a maturity date of August 17, 2021, and includes two six-month extension options. $200.0 million of the U.S. dollar Term Loans has a maturity date of August 17, 2020, and the other Term Loans have a maturity date of August 17, 2022.

As of June 30, ~~2018,~~2019, there was ~~$676.0~~$275.0 million outstanding under the Revolving Credit Facility and ~~$324.0~~$725.0 million available for borrowing.

Borrowings under the Revolving Credit Facility bear interest on the outstanding principal amount at a rate equal to an applicable interest margin plus, at the Operating Partnership’s option, either (a) LIBOR or (b) a base rate determined as the greater of (i) the federal funds rate plus 0.5%, (ii) the prime rate, and (iii) one-month LIBOR plus 1.0% (the “Base Rate”). On August 17, 2017, Sabra’s ratings met the Investment Grade Ratings Criteria (as defined in the credit agreement), and Sabra elected to use the ratings-based applicable interest margin for borrowings which will vary based on the Debt Ratings, as defined in the credit agreement, and will range from 0.875% to 1.65% per annum for LIBOR based borrowings and 0.00% to 0.65% per annum for borrowings at the Base Rate. As of June 30, ~~2018,~~2019, the interest rate on the Revolving Credit Facility was ~~3.34%~~3.65%. In addition, the Operating Partnership pays a facility fee ranging between 0.125% and 0.300% per annum based on the aggregate amount of commitments under the Revolving Credit Facility regardless of amounts outstanding thereunder.

The U.S. dollar Term Loans bear interest on the outstanding principal amount at a rate equal to an applicable interest margin plus, at the Operating Partnership’s option, either (a) LIBOR or (b) the Base Rate. The ratings-based applicable interest margin for borrowings will vary based on the Debt Ratings, as defined in the credit agreement, and will range from 0.90% to 1.90% per annum for LIBOR based borrowings and 0.00% to 0.90% per annum for borrowings at the Base Rate. The Canadian dollar Term Loan bears interest on the outstanding principal amount at a rate equal to the Canadian Dollar Offered Rate (“CDOR”) plus an interest margin that will range from 0.90% to 1.90% depending on the Debt Ratings.

On June 10, 2015, the Company entered into an interest rate swap agreement to fix the CDOR portion of the interest rate for CAD $90.0 million of its Canadian dollar Term Loan at 1.59%. In addition, CAD $90.0 million of the Canadian dollar Term Loan was designated as a net investment hedge. On August 10, 2016, the Company entered into two interest rate swap agreements to fix the LIBOR portion of the interest rate for $245.0 million of its U.S. dollar Term Loans at 0.90% and one interest rate swap agreement to fix the CDOR portion on CAD $35.0 million of its Canadian dollar Term Loan at 0.93%. See Note 8, “Derivative and Hedging Instruments” for further information.

As a result of the CCP Merger, ~~(see Note 3, “CCP Merger and Recent Real Estate Acquisitions”),~~ the Company assumed eight interest rate swap agreements that fix the LIBOR portion of the interest rate for $600 million of the Company’s U.S. dollar Term Loans at a weighted average rate of 1.31%. See Note 8, “Derivative and Hedging Instruments” for further information.

The obligations of the Borrowers under the Credit Facility are guaranteed by Sabra and certain subsidiaries of Sabra.

The Credit Facility contains customary covenants that include restrictions or limitations on the ability to make acquisitions and other investments, pay dividends, incur additional indebtedness, engage in non-healthcare related business activities, enter into transactions with affiliates and sell or otherwise transfer certain assets as well as customary events of default. The Credit Facility also requires Sabra, through the Operating Partnership, to comply with specified financial

covenants, which include a maximum leverage ratio, a minimum fixed charge coverage ratio, a maximum unsecured leverage ratio and a minimum tangible net worth requirement. As of June 30, ~~2018,~~2019, the Company was in compliance with all applicable financial covenants under the Credit Facility.

Interest Expense

~~During the~~ ~~three and six~~ ~~months ended~~ ~~June 30, 2018, the~~The Company incurred interest expense of $33.6 million and $69.9 million during the three and six months ended June 30, 2019, respectively, and $36.8 million and $72.6 million ~~respectively, and $15.9 million and $31.7 million~~ during the three and six months ended June 30, ~~2017,~~2018, respectively. Interest expense includes non-cash interest expense of $2.8 million and $5.3 million for the three and six months ended June 30, 2019, respectively, and $2.5 million and $5.0 million for the three and six months ended June 30, 2018, ~~respectively, and $1.7 million and $3.2 million for the three and six months ended June 30, 2017,~~ respectively. As of June 30, ~~2018~~2019 and December 31, ~~2017~~2018, the Company had ~~$24.5~~$14.0 million and ~~$24.7~~$24.0 million, respectively, of accrued interest included in accounts payable and accrued liabilities on the accompanying condensed consolidated balance sheets.

Maturities

The following is a schedule of maturities for the Company’s outstanding debt as of June 30, ~~2018~~2019 (in thousands):



	Secured Indebtedness			Revolving Credit Facility ⁽¹⁾		Term Loans			Senior Notes			Total
July 1 through December 31, 2019	$	1,735		$	—	$	—		$	—		$	1,735
2020	3,552			—		200,000			—			203,552
2021	18,751			275,000		—			—			293,751
2022	3,185			—		995,487			—			998,672
2023	3,282			—		—			200,000			203,282
Thereafter	85,916			—		—			900,000			985,916
Total Debt	116,421			275,000		1,195,487			1,100,000			2,686,908
Premium, net	—			—		—			13,980			13,980
Deferred financing costs, net	(1,746		)	—		(5,713		)	(7,462		)	(14,921		)
Total Debt, Net	$	114,675		$	275,000	$	1,189,774		$	1,106,518		$	2,685,967

Secured
Indebtedness

Revolving Credit
Facility ⁽¹⁾
Term Loans Senior Notes Total
July 1 through December 31, 2018 $ 2,156
$ —
$ —
$ —
$ 2,156
2019 102,920
—
—
—
102,920
2020 4,568
—
200,000
—
204,568
2021 19,757
676,000
—
500,000
1,195,757
2022 4,285
—
995,163
—
999,448
Thereafter 122,595
—
—
800,000
922,595
Total Debt 256,281
676,000
1,195,163
1,300,000
3,427,444
Premium, net —
—
—
15,216
15,216
Deferred financing costs, net (2,714 ) —
(7,765 ) (8,374 ) (18,853 )
Total Debt, Net $ 253,567
$ 676,000
$ 1,187,398
$ 1,306,842
$ 3,423,807


⁽¹⁾	Revolving Credit Facility is subject to two six-month extension options.

8. DERIVATIVE AND HEDGING INSTRUMENTS

The Company is exposed to various market risks, including the potential loss arising from adverse changes in interest rates and foreign exchange rates. The Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates and foreign exchange rates. The Company’s derivative financial instruments are used to manage differences in the amount of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

Certain of the Company’s foreign operations expose the Company to fluctuations of foreign interest rates and exchange rates. These fluctuations may impact the value in the Company’s functional currency, the U.S. dollar, of the Company’s investment in foreign operations, the cash receipts and payments related to these foreign operations and payments of interest and principal under Canadian dollar denominated debt. The Company enters into derivative financial instruments to protect the value of its foreign investments and fix a portion of the interest payments for certain debt obligations. The Company does not enter into derivatives for speculative purposes.

Cash Flow Hedges

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps and collars as part of its interest rate risk management strategy. ~~Approximately $6.6~~In May 2019, the Company terminated three forward starting interest rate swaps, resulting in a payment to counterparties totaling $12.6 million. The balance of the loss in other comprehensive income will be reclassified to earnings through 2029. As of June 30, 2019, approximately $2.5 million of gains, which are included in accumulated other comprehensive income, ~~as of June 30, 2018,~~ are expected to be reclassified into earnings in the next 12 months.

Net Investment Hedges

The Company is exposed to fluctuations in foreign exchange rates on investments it holds in Canada. The Company uses cross currency interest rate swaps to hedge its exposure to changes in foreign exchange rates on these foreign investments.

The following presents the notional amount of ~~derivatives~~derivative instruments as of the dates indicated (in thousands):



	June 30, 2019		December 31, 2018
Derivatives designated as cash flow hedges:
Denominated in U.S. Dollars ⁽¹⁾	$	1,490,000	$	1,045,000
Denominated in Canadian Dollars	$	125,000	$	125,000

Derivatives designated as net investment hedges:
Denominated in Canadian Dollars	$	54,941	$	55,401

Financial instrument designated as net investment hedge:
Denominated in Canadian Dollars	$	125,000	$	125,000

Derivatives not designated as net investment hedges:
Denominated in Canadian Dollars	$	1,359	$	899

June 30, 2018 December 31, 2017
Derivatives designated as cash flow hedges:
Denominated in U.S. Dollars $ 845,000
$ 845,000
Denominated in Canadian Dollars $ 125,000
$ 125,000

Derivatives designated as net investment hedges:
Denominated in Canadian Dollars $ 56,300
$ 56,300

Financial instrument designated as net investment hedge:
Denominated in Canadian Dollars $ 125,000
$ 125,000

⁽¹⁾Balance includes four forward starting interest rate swaps and one forward starting interest rate collar with an effective date of August 2020 and two forward starting interest rate swaps and one forward starting interest rate collar with an effective date of January 2021 that were entered into as of June 30, 2019. The forward starting interest rate swaps and forward starting interest rate collars have an aggregate initial notional amount of $645.0 million accreting to $845.0 million in January 2023.

Derivative and Financial Instruments Designated as Hedging Instruments

The following is a summary of the derivative and financial instruments designated as hedging instruments held by the Company at June 30, ~~2018~~2019 and December 31, ~~2017~~2018 (dollars in thousands):



		Count as of June 30, 2019	Fair Value				Maturity Dates
Type	Designation	Count as of June 30, 2019	June 30, 2019		December 31, 2018		Maturity Dates	Balance Sheet Location
Assets:
Interest rate swaps	Cash flow	10	$	7,704	$	25,184	2020 - 2023	Accounts receivable, prepaid expenses and other assets, net
Forward starting interest rate swaps	Cash flow	6	128		—		2024	Accounts receivable, prepaid expenses and other assets, net
Cross currency interest rate swaps	Net investment	2	2,796		4,160		2025	Accounts receivable, prepaid expenses and other assets, net
			$	10,628	$	29,344

Liabilities:
Forward starting interest rate swaps	Cash flow	—	$	—	$	4,529	2029	Accounts payable and accrued liabilities
Forward starting interest rate collars	Cash flow	2	73		—		2024	Accounts payable and accrued liabilities
CAD term loan	Net investment	1	95,488		91,700		2022	Term loans, net
			$	95,561	$	96,229

Count as of June 30, 2018 Fair Value Maturity Dates
Type Designation June 30, 2018 December 31, 2017 Balance Sheet Location
Assets:
Interest rate swaps Cash flow 12
$ 35,719
$ 25,221
2020 - 2023 Accounts receivable, prepaid expenses and other assets, net
Cross currency interest rate swaps Net investment 2
2,146
674
2025 Accounts receivable, prepaid expenses and other assets, net
$ 37,865
$ 25,895

Liabilities:
CAD term loan Net investment 1
95,163
99,588
2022 Term loans, net
$ 95,163
$ 99,588

The following presents the effect of the Company’s derivative and financial instruments designated as hedging instruments on the condensed consolidated statements of income and the condensed consolidated statements of equity for the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands):



	(Loss) Gain Recognized in Other Comprehensive (Loss) Income
	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018		Income Statement Location

Cash Flow Hedges:
Interest rate products	$	(8,126	)	$	4,009	$	(19,737	)	$	13,132	Interest expense
Net Investment Hedges:
Foreign currency products	(42		)	898		(1,276		)	1,505		N/A
CAD term loan	(1,863		)	1,750		(3,788		)	4,425		N/A

	$	(10,031	)	$	6,657	$	(24,801	)	$	19,062

Gain (Loss) Recognized in Other Comprehensive Income
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017 Income Statement Location

Cash Flow Hedges:
Interest rate products $ 4,009
$ (136 ) $ 13,132
$ 125
Interest expense
Net Investment Hedges:
Foreign currency products 898
(242 ) 1,505
(1,159 ) N/A
CAD term loan 1,750
(2,513 ) 4,425
(3,288 ) N/A

$ 6,657
$ (2,891 ) $ 19,062
$ (4,322 )



	Gain Reclassified from Accumulated Other Comprehensive Income into Income
	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		Income Statement Location

Cash Flow Hedges:
Interest rate products	$	1,695	$	633	$	3,608	$	583	Interest expense

Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017 Income Statement Location

Cash Flow Hedges:
Interest rate products $ 633
$ (399 ) $ 583
$ (869 ) Interest expense
Net Investment Hedges:
Foreign currency products —
—
—
—
N/A
CAD term loan —
—
—
—
N/A

$ 633
$ (399 ) $ 583
$ (869 )

The gain ~~(loss)~~ in the table above related to interest rate products was reclassified from accumulated other comprehensive income into interest expense. Interest expense totaled $33.6 million and $69.9 million for the three and six months ended June 30, 2019, respectively, and $36.8 million and $72.6 million for the three and six months ended June 30, 2018, ~~respectively, and $15.9 million and $31.7 million for the~~ ~~three and six~~ ~~months ended June 30, 2017,~~ respectively.

During the three and six months ended June 30, 2019 and 2018, no cash flow hedges were determined to be ineffective.

Derivatives Not Designated as Hedging Instruments

As of June 30, 2019, the Company had one outstanding cross currency interest rate swap not designated as a hedging instrument in an asset position with a fair value of $68,000 and included this amount in accounts receivable, prepaid expenses and other assets, net on the condensed consolidated balance sheets. During the three and six months ended June 30, ~~2017,~~2019, the Company ~~determined that a portion of a cash flow hedge was ineffective~~recorded $1,000 and ~~recognized $14,000 and $0.1 million,~~$7,000, respectively, of ~~unrealized losses~~other expense related to ~~its interest rate swaps to other income in the condensed consolidated statements of income.~~this derivative not designated as a hedging instrument.

Offsetting Derivatives

The Company enters into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of June 30, ~~2018~~2019 and December 31, ~~2017~~2018 (in thousands):


	As of June 30, 2018																							As of June 30, 2019
	Gross Amounts of Recognized Assets / Liabilities			Gross Amounts Offset in the Balance Sheet				Net Amounts of Assets / Liabilities presented in the Balance Sheet				Gross Amounts Not Offset in the Balance Sheet												Gross Amounts of Recognized Assets / Liabilities			Gross Amounts Offset in the Balance Sheet			Net Amounts of Assets / Liabilities presented in the Balance Sheet			Gross Amounts Not Offset in the Balance Sheet
			Financial Instruments								Cash Collateral Received				Net Amount							Financial Instruments					Gross Amounts Offset in the Balance Sheet		Cash Collateral Received				Net Amount
Offsetting Assets:	Gross Amounts of Recognized Assets / Liabilities
Derivatives	$	37,865		Gross Amounts Offset in the Balance Sheet		$	—			$	37,865			$	—			$	—			$	37,865	Gross Amounts of Recognized Assets / Liabilities		$	10,628		$			—		$	10,628		$	(73	)		$	—	$	10,555
Offsetting Liabilities:
Derivatives	$	—		$	—			$	—			$	—			$	—			$	—			$	73		$	—		$	73		$	(73	)	$	—			$	—



	As of December 31, 2018
	Gross Amounts of Recognized Assets / Liabilities		Gross Amounts Offset in the Balance Sheet		Net Amounts of Assets / Liabilities presented in the Balance Sheet		Gross Amounts Not Offset in the Balance Sheet
	Gross Amounts of Recognized Assets / Liabilities		Gross Amounts Offset in the Balance Sheet				Financial Instruments			Cash Collateral Received		Net Amount
Offsetting Assets:
Derivatives	$	29,344	$	—	$	29,344	$	(2,069	)	$	—	$	27,275
Offsetting Liabilities:
Derivatives	$	4,529	$	—	$	4,529	$	(2,069	)	$	—	$	2,460

As of December 31, 2017
Gross Amounts of Recognized Assets / Liabilities Gross Amounts Offset in the Balance Sheet Net Amounts of Assets / Liabilities presented in the Balance Sheet Gross Amounts Not Offset in the Balance Sheet
Financial Instruments Cash Collateral Received Net Amount
Offsetting Assets:
Derivatives $ 25,895
$ —
$ 25,895
$ —
$ —
$ 25,895
Offsetting Liabilities:
Derivatives $ —
$ —
$ —
$ —
$ —
$ —

Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision pursuant to which the Company could be declared in default on the derivative obligation if the Company defaults on any of its indebtedness, including a default where repayment of the indebtedness has not been accelerated by the lender.

As of June 30, ~~2018,~~2019, the ~~Company had no derivatives with a~~ fair value of derivatives in a net liability ~~position.~~position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $16,000. As of June 30, 2019, the Company has not posted any collateral related to these agreements. If the Company had breached any of these provisions at June 30, 2019, it could have been required to settle its obligations under the agreements at their termination value of $16,000.

9. FAIR VALUE DISCLOSURES

Financial Instruments

The fair value for certain financial instruments is derived using a combination of market quotes, pricing models and other valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments.

Financial instruments for which actively quoted prices or pricing parameters are available and whose markets contain orderly transactions will generally have a higher degree of price transparency than financial instruments whose markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. The carrying values of cash and cash equivalents, restricted cash, accounts payable, accrued liabilities and the Credit Facility are reasonable estimates of fair value because of the short-term maturities of these instruments. Fair values for other financial instruments are derived as follows:

Loans receivable: These instruments are presented on the accompanying condensed consolidated balance sheets at their amortized cost and not at fair value. The fair values of the loans receivable were estimated using an internal valuation model that considered the expected cash flows for the loans receivable, as well as the underlying collateral value and other credit enhancements as applicable. As such, the Company classifies these instruments as Level 3.

Preferred equity investments: These instruments are presented on the accompanying condensed consolidated balance sheets at their cost and not at fair value. The fair values of the preferred equity investments were estimated using an internal valuation model that considered the expected future cash flows for the preferred equity ~~investment,~~investments, the underlying collateral value and other credit enhancements. As such, the Company classifies these instruments as Level 3.

Derivative instruments: The Company’s derivative instruments are presented at fair value on the accompanying condensed consolidated balance sheets. The Company estimates the fair value of derivative instruments, including its interest rate swaps and cross currency swaps, using the assistance of a third party using inputs that are observable in the market, which include forward yield curves and other relevant information. Although the Company has determined that the majority of the inputs used to value its derivative financial instruments fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivative financial instruments utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties. The Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivative financial instruments. As a result, the Company has determined that its derivative financial instruments valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Senior Notes: These instruments are presented on the accompanying condensed consolidated balance sheets at their outstanding principal balance, net of unamortized deferred financing costs and premiums/discounts and not at fair value. The fair values of the Senior Notes were determined using third-party market quotes derived from orderly trades. As such, the Company classifies these instruments as Level 2.

Secured indebtedness: These instruments are presented on the accompanying condensed consolidated balance sheets at their outstanding principal balance, net of unamortized deferred financing costs and premiums/discounts and not at fair value. The fair values of the Company’s secured debt were estimated using a discounted cash flow analysis based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. As such, the Company classifies these instruments as Level 3.

The following are the face values, carrying amounts and fair values of the Company’s financial instruments as of June 30, ~~2018~~2019 and December 31, ~~2017~~2018 whose carrying amounts do not approximate their fair value (in thousands):



	June 30, 2019						December 31, 2018
	Face Value ⁽¹⁾		Carrying Amount ⁽²⁾		Fair Value		Face Value ⁽¹⁾		Carrying Amount ⁽²⁾		Fair Value
Financial assets:
Loans receivable	$	72,728	$	66,876	$	63,977	$	96,492	$	69,460	$	65,797
Preferred equity investments	43,915		44,327		44,280		43,851		44,262		43,825
Financial liabilities:
Senior Notes	1,100,000		1,106,518		1,143,537		1,300,000		1,307,394		1,270,877
Secured indebtedness	116,421		114,675		108,446		117,464		115,679		101,820

June 30, 2018 December 31, 2017

Face
Value ⁽¹⁾

Carrying
Amount ⁽²⁾

Fair
Value

Face
Value ⁽¹⁾

Carrying
Amount ⁽²⁾

Fair
Value
Financial assets:
Loans receivable $ 80,687
$ 55,880
$ 58,656
$ 91,280
$ 65,907
$ 65,892
Preferred equity investments 50,856
51,348
50,787
48,035
48,483
47,064
Financial liabilities:
Senior Notes 1,300,000
1,306,842
1,292,347
1,300,000
1,306,286
1,329,191
Secured indebtedness 256,281
253,567
236,862
259,202
256,430
246,461


⁽¹⁾	Face value represents amounts contractually due under the terms of the respective agreements.


⁽²⁾	Carrying amount represents the book value of financial instruments, including unamortized premiums/discounts and deferred financing costs.

The Company determined the fair value of financial instruments as of June 30, ~~2018~~2019 whose carrying amounts do not approximate their fair value with valuation methods utilizing the following types of inputs (in thousands):



			Fair Value Measurements Using
			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Total				Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Loans receivable	$	63,977	$	—	$	—	$	63,977
Preferred equity investments	44,280		—		—		44,280
Financial liabilities:
Senior Notes	1,143,537		—		1,143,537		—
Secured indebtedness	108,446		—		—		108,446

Fair Value Measurements Using

Quoted Prices in Active Markets for Identical Assets
(Level 1)

Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)
Total
Financial assets:
Loans receivable $ 58,656
$ —
$ —
$ 58,656
Preferred equity investments 50,787
—
—
50,787
Financial liabilities:
Senior Notes 1,292,347
—
1,292,347
—
Secured indebtedness 236,862
—
—
236,862

Disclosure of the fair value of financial instruments is based on pertinent information available to the Company at the applicable dates and requires a significant amount of judgment. Despite increased capital market and credit market activity, transaction volume for certain financial instruments remains relatively low. This has made the estimation of fair values difficult and, therefore, both the actual results and the Company’s estimate of fair value at a future date could be materially different.

Items Measured at Fair Value on a Recurring Basis

During the six months ended June 30, ~~2018,~~2019, the Company recorded the following amounts measured at fair value (in thousands):



			Fair Value Measurements Using
			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Total				Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring Basis:
Financial assets:
Interest rate swaps	$	7,704	$	—	$	7,704	$	—
Forward starting interest rate swaps	128		—		128		—
Cross currency interest rate swaps	2,796		—		2,796		—
Financial liabilities:
Forward starting interest rate collars	73		—		73		—

Fair Value Measurements Using

Quoted Prices in Active Markets for Identical Assets
(Level 1)

Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)
Total
Recurring Basis:
Financial assets:
Interest rate swap $ 35,719
$ —
$ 35,719
$ —
Cross currency swap 2,146
—
2,146
—

10. EQUITY

Preferred Stock

On March 21, 2013, the Company completed an underwritten public offering of 5,750,000 shares of 7.125% Series A Cumulative Redeemable Preferred Stock (the “Series A Preferred Stock”) at a price of $25.00 per share, pursuant to an effective registration statement. The Company received net proceeds of $138.3 million from the offering, after deducting underwriting discounts and other offering expenses. The Company classified the par value as preferred equity on its condensed consolidated balance sheets with the balance of the liquidation preference, net of any issuance costs, recorded as an increase in paid-in capital.

The Company redeemed all 5,750,000 shares of its Series A Preferred Stock on June 1, 2018 (the “Redemption Date”) for $25.00 per share, plus accrued and unpaid dividends to, but not including, the Redemption Date, without interest, in the amount of $0.4453125 per share of Series A Preferred Stock, for a total redemption price per share of Series A Preferred Stock equal to $25.4453125. As a result of the redemption, the Company incurred a charge of $5.5 million related to the original issuance costs of the Series A Preferred ~~Stock. The charge is presented as an additional preferred stock dividend in~~Stock during the ~~Company’s condensed consolidated statements of income.~~three months ended June 30, 2018.

Common Stock

~~As a result of the CCP Merger completed on August 17, 2017,~~On February 25, 2019, the Company ~~issued approximately 94.0 million~~entered into an equity distribution agreement (the “Distribution Agreement”) with a consortium of banks acting as sales agents (the “Sales Agents”) to sell shares of its common stock ~~in exchange~~having aggregate gross proceeds of up to $500.0 million from time to time through the Sales Agents (the “ATM Program”).

Pursuant to the terms of the Distribution Agreement, the shares may be sold by any method permitted by law deemed to be an “at-the-market” offering, including, without limitation, sales made directly on the Nasdaq Global Select Market, on any other existing trading market for ~~shares of CCP~~the Company’s common stock or to or through a market maker (which may include block transactions). In addition, with the Company’s prior consent, the Sales Agents may also sell the shares in privately negotiated transactions. The Company will pay each Sales Agent a commission of up to 1.5% of the gross proceeds from the sales of shares sold pursuant to the Distribution Agreement. The offering of shares pursuant to the Distribution Agreement will terminate upon the earlier of (i) the sale of the maximum aggregate amount of the shares subject to the Distribution Agreement, or (ii) the termination of the Distribution Agreement as permitted therein. The offering of shares pursuant to the Distribution Agreement may also be suspended as permitted therein.

During the three and ~~shares underlying share-based awards assumed by~~six months ended June 30, 2019, the Company ~~outstanding as~~sold 11.1 million shares under the ATM Program at an average price of ~~the effective time~~$19.59 per share, generating gross proceeds of ~~the CCP Merger.~~

~~On September 28, 2017,~~$217.3 million, before $3.3 million of commissions. As of June 30, 2019, the Company ~~completed an underwritten public offering of 16.0~~had $282.7 million newly issued shares of its common stock pursuant to an effective registration statement. The underwriters exercised their option to purchase additional shares, and on October 2, 2017, the Company issued an additional 2.4 million newly issued shares of its common stock pursuant to an effective registration statement. The Company received net proceeds, before expenses, of $370.9 million from the offering, after giving effect to the issuance and sale of all 18.4 million shares of common stock, at a price of $21.00 per share. These proceeds were used to repay borrowings outstandingavailable under the ~~Revolving Credit Facility.~~ATM Program.

The following table lists the cash dividends on common stock declared and paid by the Company during the six months ended June 30, ~~2018~~2019:



Declaration Date	Record Date	Amount Per Share		Dividend Payable Date
February 5, 2019	February 15, 2019	$	0.45	February 28, 2019
May 8, 2019	May 20, 2019	$	0.45	May 31, 2019

Declaration Date Record Date Amount Per Share Dividend Payable Date
February 5, 2018 February 15, 2018 $ 0.45
February 28, 2018
May 9, 2018 May 21, 2018 $ 0.45
May 31, 2018

During the six months ended June 30, ~~2018,~~2019, the Company issued ~~27,747~~114,185 shares of common stock as a result of restricted stock unit vestings.

Upon any payment of shares to employees as a result of restricted stock unit vestings, the employees’ related tax withholding obligation will generally be satisfied by the Company, reducing the number of shares to be delivered by a number of shares necessary to satisfy the related applicable tax withholding obligation. During the six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, the Company incurred ~~$0.2~~$1.3 million and ~~$2.6~~$0.2 million, respectively, in tax withholding obligations on behalf of its employees that were satisfied through a reduction in the number of shares delivered to those participants.

Accumulated Other Comprehensive (Loss) Income

The following is a summary of the Company’s accumulated other comprehensive (loss) income (in thousands):



	June 30, 2019			December 31, 2018
Foreign currency translation loss	$	(2,186	)	$	(2,193	)
Unrealized (loss) gain on cash flow hedges	(8,750		)	14,494

Total accumulated other comprehensive (loss) income	$	(10,936	)	$	12,301

June 30, 2018 December 31, 2017
Foreign currency translation loss $ (3,026 ) $ (2,913 )
Unrealized gains on cash flow hedges 27,438
14,202

Total accumulated other comprehensive income $ 24,412
$ 11,289

11. EARNINGS PER COMMON SHARE

The following table illustrates the computation of basic and diluted earnings per share for the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands, except share and per share amounts):



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Numerator
Net income attributable to common stockholders	$	83,677	$	193,580	$	5,973	$	253,490

Denominator
Basic weighted average common shares and common equivalents	181,567,464		178,314,750		179,984,959		178,304,733
Dilutive restricted stock units	686,636		369,274		652,100		296,056

Diluted weighted average common shares	182,254,100		178,684,024		180,637,059		178,600,789

Net income attributable to common stockholders, per:

Basic common share	$	0.46	$	1.09	$	0.03	$	1.42

Diluted common share	$	0.46	$	1.08	$	0.03	$	1.42

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Numerator
Net income attributable to common stockholders $ 193,580
$ 17,960
$ 253,490
$ 34,222

Denominator
Basic weighted average common shares and common equivalents 178,314,750
65,438,739
178,304,733
65,396,146
Dilutive restricted stock units 369,274
232,114
296,056
297,873

Diluted weighted average common shares 178,684,024
65,670,853
178,600,789
65,694,019

Net income attributable to common stockholders, per:

Basic common share $ 1.09
$ 0.27
$ 1.42
$ 0.52

Diluted common share $ 1.08
$ 0.27
$ 1.42
$ 0.52

During the three and six months ended June 30, ~~2018~~2019, approximately ~~35,300~~1,100 and ~~46,000~~2,900 restricted stock units, respectively, were not included in computing diluted earnings per share because they were considered anti-dilutive. During the three and six months ended June 30, ~~2017,~~2018, approximately ~~15,900~~35,300 and ~~19,300~~46,000 restricted stock units, respectively, were not included in computing diluted earnings per share because they were considered anti-dilutive. No stock options were outstanding as of June 30, 2019, and no stock options were considered anti-dilutive during the three and six months ended June 30, ~~2018, and no stock options were outstanding during the three and six months ended June 30, 2017.~~2018.

12. SUMMARIZED CONDENSED CONSOLIDATING INFORMATION

In connection with the offerings of the ~~2021~~2023 Notes and the ~~2023~~2024 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 ~~2021~~2023 Notes and the ~~2023~~2024 Notes, subject to release under certain customary circumstances as described below. In connection with the assumption of the 2026 Notes as a result of the CCP Merger, ~~(see Note 3, “CCP Merger and Recent Real Estate Acquisitions”),~~ the Company has fully and unconditionally guaranteed the 2026 Notes, subject to release under certain 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 ~~2021~~2023 Notes and the ~~2023~~2024 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 ~~2021~~2023 Notes or the ~~2023~~2024 Notes or another Guarantor, provided that the surviving entity remains a Guarantor;

With respect to the 2023 Notes, a subsidiary Guarantor is declared “unrestricted” for covenant purposes under the ~~indentures~~indenture governing ~~the 2021 Notes or~~ the 2023 Notes;

The requirements for legal defeasance or covenant defeasance or to discharge the indentures governing the ~~2021~~2023 Notes or the ~~2023~~2024 Notes have been satisfied;

A liquidation or dissolution, to the extent permitted under the indentures governing the ~~2021~~2023 Notes or the ~~2023~~2024 Notes, of a subsidiary Guarantor; or

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.~~guaranty; or

With respect to the 2024 Notes, if the subsidiary Guarantor is not a guarantor or is not otherwise liable in respect of any obligations under any credit facility (as defined in the indenture governing the 2024 Notes) of the Company or any of its subsidiaries.

The Company will be automatically and unconditionally released from its obligations under the guarantees with respect to the 2026 Notes in the event of:

A liquidation or dissolution, to the extent permitted under the indenture governing the 2026 Notes;

A merger or consolidation, provided that the surviving entity remains a Guarantor; or

The requirements for legal defeasance or covenant defeasance or to discharge the indenture governing the 2026 Notes have been satisfied.

Pursuant to Rule 3-10 of Regulation S-X, the following summarized condensed consolidating information is provided for the Company (the “Parent Company”), the Operating Partnership, Sabra Capital Corporation, the Guarantors, and the Company’s non-Guarantor subsidiaries with respect to the ~~2021~~2023 Notes and the ~~2023~~2024 Notes. This summarized financial information has been prepared from the books and records maintained by the Company, the Operating Partnership, Sabra Capital Corporation, 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 Operating Partnership, Sabra Capital Corporation, 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 Operating Partnership only, Sabra Capital Corporation only, the combined Guarantor subsidiaries and the combined non-Guarantor subsidiaries, are as follows:

CONDENSED CONSOLIDATING BALANCE SHEET

June 30, ~~2018~~2019

(in thousands)

(unaudited)


						Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾																Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾
	Parent Company⁽¹⁾			Operating Partnership⁽²⁾		Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2021 Notes and 2023 Notes⁽⁴⁾		Combined Non- Guarantor Subsidiaries of 2021 Notes and 2023 Notes⁽⁵⁾		Elimination			Consolidated		Parent Company⁽¹⁾			Operating Partnership⁽²⁾		Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁴⁾		Combined Non- Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁵⁾		Elimination			Consolidated
Assets
Real estate investments, net of accumulated depreciation	$	341		$	—	$	—	$	1,666,116	$	4,327,225	$	—		$	5,993,682	$	294		$	—	$	—	$	1,423,107	$	3,955,473	$	—		$	5,378,874
Loans receivable and other investments, net	(356		)	—		—		52,315		55,269		—			107,228		(726		)	—		—		55,453		56,476		—			111,203
Investment in unconsolidated joint venture	—			—		—		—		348,950		—			348,950		—			—		—		—		328,207		—			328,207
Cash and cash equivalents	31,269			—		—		1,405		6,135		—			38,809		38,500			—		—		2,604		6,491		—			47,595
Restricted cash	—			—		—		174,913		11,932		—			186,845		—			—		—		1,881		7,998		—			9,879
Lease intangible assets, net	—			—		—		16,815		139,451		—			156,266		—			—		—		9,299		99,578		—			108,877
Accounts receivable, prepaid expenses and other assets, net	(536		)	46,700		—		84,809		73,017		(7,626		)	196,364		4,433			17,873		—		29,119		95,671		(8,552		)	138,544
Intercompany	2,186,044			2,727,032		—		—		—		(4,913,076		)	—		1,993,632			2,035,256		—		—		—		(4,028,888		)	—
Investment in subsidiaries	1,209,953			1,538,155		—		15,830		—		(2,763,938		)	—		1,253,100			1,690,158		—		34,271		—		(2,977,529		)	—
Total assets	$	3,426,715		$	4,311,887	$	—	$	2,012,203	$	4,961,979	$	(7,684,640	)	$	7,028,144	$	3,289,233		$	3,743,287	$	—	$	1,555,734	$	4,549,894	$	(7,014,969	)	$	6,123,179

Liabilities
Secured debt, net	$	—		$	—	$	—	$	—	$	253,567	$	—		$	253,567	$	—		$	—	$	—	$	—	$	114,675	$	—		$	114,675
Revolving credit facility	—			676,000		—		—		—		—			676,000		—			275,000		—		—		—		—			275,000
Term loans, net	—			1,093,314		—		94,084		—		—			1,187,398		—			1,095,102		—		94,672		—		—			1,189,774
Senior unsecured notes, net	—			1,306,842		—		—		—		—			1,306,842		—			1,106,518		—		—		—		—			1,106,518
Accounts payable and accrued liabilities	23,172			25,778		—		3,576		60,439		(7,626		)	105,339		33,135			13,567		—		2,002		60,483		(8,552		)	100,635
Lease intangible liabilities, net	—			—		—		—		91,073		—			91,073		—			—		—		—		76,201		—			76,201
Intercompany	—			—		—		636,037		4,277,039		(4,913,076		)	—		—			—		—		664,912		3,363,976		(4,028,888		)	—
Total liabilities	23,172			3,101,934		—		733,697		4,682,118		(4,920,702		)	3,620,219		33,135			2,490,187		—		761,586		3,615,335		(4,037,440		)	2,862,803

Total Sabra Health Care REIT, Inc. stockholders' equity	3,403,543			1,209,953		—		1,278,506		275,479		(2,763,938		)	3,403,543
Total Sabra Health Care REIT, Inc. stockholders’ equity																	3,256,098			1,253,100		—		794,148		930,281		(2,977,529		)	3,256,098
Noncontrolling interests	—			—		—		—		4,382		—			4,382		—			—		—		—		4,278		—			4,278
Total equity	3,403,543			1,209,953		—		1,278,506		279,861		(2,763,938		)	3,407,925		3,256,098			1,253,100		—		794,148		934,559		(2,977,529		)	3,260,376
Total liabilities and equity	$	3,426,715		$	4,311,887	$	—	$	2,012,203	$	4,961,979	$	(7,684,640	)	$	7,028,144	$	3,289,233		$	3,743,287	$	—	$	1,555,734	$	4,549,894	$	(7,014,969	)	$	6,123,179


⁽¹⁾	The Parent Company guarantees the ~~2021~~2023 Notes, the ~~2023~~2024 Notes and the 2026 Notes.


⁽²⁾	The Operating Partnership is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes and the issuer of the 2026 Notes.


⁽³⁾	Sabra Capital Corporation is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁴⁾	The Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁵⁾	The Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes consist of the subsidiaries that do not guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁶⁾	None of Sabra Capital Corporation, the Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes, nor the Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the 2026 Notes.

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, ~~2017~~2018

(in thousands)

(unaudited)



						Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾
	Parent Company⁽¹⁾			Operating Partnership⁽²⁾		Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁴⁾		Combined Non- Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁵⁾		Elimination			Consolidated
Assets
Real estate investments, net of accumulated depreciation	$	317		$	—	$	—	$	1,453,451	$	4,399,777	$	—		$	5,853,545
Loans receivable and other investments, net	(560		)	—		—		50,534		63,748		—			113,722
Investment in unconsolidated joint venture	—			—		—		—		340,120		—			340,120
Cash and cash equivalents	40,835			—		—		3,508		5,887		—			50,230
Restricted cash	—			—		—		1,820		7,608		—			9,428
Lease intangible assets, net	—			—		—		13,947		117,150		—			131,097
Accounts receivable, prepaid expenses and other assets, net	798			37,075		—		58,704		81,603		(11,019		)	167,161
Intercompany	1,972,059			2,646,669		—		—		—		(4,618,728		)	—
Investment in subsidiaries	1,258,715			1,629,795		—		33,083		—		(2,921,593		)	—
Total assets	$	3,272,164		$	4,313,539	$	—	$	1,615,047	$	5,015,893	$	(7,551,340	)	$	6,665,303

Liabilities
Secured debt, net	$	—		$	—	$	—	$	—	$	115,679	$	—		$	115,679
Revolving credit facility	—			624,000		—		—		—		—			624,000
Term loans, net	—			1,094,177		—		90,753		—		—			1,184,930
Senior unsecured notes, net	—			1,307,394		—		—		—		—			1,307,394
Accounts payable and accrued liabilities	21,750			29,253		—		2,570		52,273		(11,019		)	94,827
Lease intangible liabilities, net	—			—		—		—		83,726		—			83,726
Intercompany	—			—		—		810,394		3,808,334		(4,618,728		)	—
Total liabilities	21,750			3,054,824		—		903,717		4,060,012		(4,629,747		)	3,410,556

Total Sabra Health Care REIT, Inc. stockholders’ equity	3,250,414			1,258,715		—		711,330		951,548		(2,921,593		)	3,250,414
Noncontrolling interests	—			—		—		—		4,333		—			4,333
Total equity	3,250,414			1,258,715		—		711,330		955,881		(2,921,593		)	3,254,747
Total liabilities and equity	$	3,272,164		$	4,313,539	$	—	$	1,615,047	$	5,015,893	$	(7,551,340	)	$	6,665,303

Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾

Parent
Company⁽¹⁾

Operating Partnership⁽²⁾

Sabra Capital Corporation⁽³⁾

Combined
Guarantor
Subsidiaries of 2021 Notes and 2023 Notes⁽⁴⁾

Combined Non-
Guarantor
Subsidiaries of 2021 Notes and 2023 Notes⁽⁵⁾
Elimination Consolidated
Assets
Real estate investments, net of accumulated depreciation $ 324
$ —
$ —
$ 1,756,933
$ 4,237,175
$ —
$ 5,994,432
Loans receivable and other investments, net (97 ) —
—
55,297
59,190
—
114,390
Cash and cash equivalents 511,670
—
—
449
6,513
—
518,632
Restricted cash —
—
—
36,910
31,907
—
68,817
Lease intangible assets, net —
—
—
17,577
149,542
—
167,119
Accounts receivable, prepaid expenses and other assets, net 3,499
36,073
—
80,739
53,765
(5,189 ) 168,887
Intercompany 2,043,402
2,721,979
—
—
—
(4,765,381 ) —
Investment in subsidiaries 890,462
1,198,305
—
14,661
—
(2,103,428 ) —
Total assets $ 3,449,260
$ 3,956,357
$ —
$ 1,962,566
$ 4,538,092
$ (6,873,998 ) $ 7,032,277

Liabilities
Secured debt, net $ —
$ —
$ —
$ —
$ 256,430
$ —
$ 256,430
Revolving credit facility —
641,000
—
—
—
—
641,000
Term loans, net —
1,092,397
—
98,377
—
—
1,190,774
Senior unsecured notes, net —
1,306,286
—
—
—
—
1,306,286
Accounts payable and accrued liabilities 16,453
26,212
—
3,560
61,487
(5,189 ) 102,523
Lease intangible liabilities, net —
—
—
—
98,015
—
98,015
Intercompany —
—
—
785,120
3,980,261
(4,765,381 ) —
Total liabilities 16,453
3,065,895
—
887,057
4,396,193
(4,770,570 ) 3,595,028

Total Sabra Health Care REIT, Inc. stockholders' equity 3,432,807
890,462
—
1,075,509
137,457
(2,103,428 ) 3,432,807
Noncontrolling interests —
—
—
—
4,442
—
4,442
Total equity 3,432,807
890,462
—
1,075,509
141,899
(2,103,428 ) 3,437,249
Total liabilities and equity $ 3,449,260
$ 3,956,357
$ —
$ 1,962,566
$ 4,538,092
$ (6,873,998 ) $ 7,032,277


⁽¹⁾	The Parent Company guarantees the ~~2021~~2023 Notes, the ~~2023~~2024 Notes and the 2026 Notes.


⁽²⁾	The Operating Partnership is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes and the issuer of the 2026 Notes.


⁽³⁾	Sabra Capital Corporation is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁴⁾	The Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁵⁾	The Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes consist of the subsidiaries that do not guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁶⁾	None of Sabra Capital Corporation, the Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes, nor the Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the 2026 Notes.

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Three Months EndedJune 30, ~~2018~~2019

(dollars in thousands, except per share amounts)

(unaudited)


							Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾																			Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾
	Parent Company⁽¹⁾			Operating Partnership⁽²⁾			Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2021 Notes and 2023 Notes⁽⁴⁾			Combined Non- Guarantor Subsidiaries of 2021 Notes and 2023 Notes⁽⁵⁾			Elimination			Consolidated			Parent Company⁽¹⁾		Operating Partnership⁽²⁾			Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁴⁾			Combined Non- Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁵⁾			Elimination			Consolidated
Revenues:
Rental income	$	—		$	—		$	—	$	44,560		$	103,989		$	(4,320	)	$	144,229
Rental and related revenues																					$	—	$	—		$	—	$	30,097		$	92,073		$	(9,370	)	$	112,800
Interest and other income	40			96			—		1,198			3,315			(96		)	4,553			91		1,896			—		68,198			2,206			(1,896		)	70,495
Resident fees and services	—			—			—		—			17,530			—			17,530			—		—			—		—			36,071			—			36,071
Total revenues	40			96			—		45,758			124,834			(4,416		)	166,312			91		1,896			—		98,295			130,350			(11,266		)	219,366
Expenses:
Depreciation and amortization	222			—			—		14,146			32,460			—			46,828			12		—			—		15,559			33,905			—			49,476
Interest	—			33,415			—		810			2,628			(96		)	36,757			—		31,616			—		2,666			1,222			(1,896		)	33,608
Operating expenses	—			—			—		—			16,619			(4,320		)	12,299
Triple-net portfolio operating expenses																					—		—			—		156			6,084			—			6,240
Senior housing - managed portfolio operating expenses																					—		—			—		—			33,609			(9,370		)	24,239
General and administrative	8,009			14			—		379			869			—			9,271			7,706		31			—		1			321			—			8,059
Merger and acquisition costs	112			—			—		—			—			—			112
Provision for (recovery of) doubtful accounts and loan losses	311			—			—		(985		)	—			—			(674		)
Provision for doubtful accounts, straight-line rental income and loan losses																					193		—			—		—			—			—			193
Impairment of real estate	—			—			—		881			—			—			881			—		—			—		—			2,002			—			2,002
Total expenses	8,654			33,429			—		15,231			52,576			(4,416		)	105,474			7,911		31,647			—		18,382			77,143			(11,266		)	123,817
Other income:
Other income (expense)	—			32			—		(32		)	—			—			—
Other (expense) income:
Loss on extinguishment of debt																					—		(10,119		)	—		—			—			—			(10,119		)
Other (expense) income																					—		(109		)	—		108			—			—			(1		)
Net gain on sales of real estate	—			—			—		141,918			985			—			142,903			—		—			—		190			2,565			—			2,755
Total other income	—			32			—		141,886			985			—			142,903
Total other (expense) income																					—		(10,228		)	—		298			2,565			—			(7,365		)
Income in subsidiary	209,456			242,758			—		1,871			—			(454,085		)	—			91,406		131,385			—		1,691			—			(224,482		)	—
Income before loss from unconsolidated joint venture and income tax expense	200,842			209,457			—		174,284			73,243			(454,085		)	203,741			83,586		91,406			—		81,902			55,772			(224,482		)	88,184
Loss from unconsolidated joint venture	—			—			—		—			(2,347		)	—			(2,347		)	—		—			—		—			(3,647		)	—			(3,647		)
Income tax expense	(55		)	(1		)	—		(489		)	(60		)	—			(605		)
Income tax benefit (expense)																					91		—			—		(542		)	(403		)	—			(854		)
Net income	200,787			209,456			—		173,795			70,836			(454,085		)	200,789			83,677		91,406			—		81,360			51,722			(224,482		)	83,683
Net income attributable to noncontrolling interests	—			—			—		—			(2		)	—			(2		)	—		—			—		—			(6		)	—			(6		)
Net income attributable to Sabra Health Care REIT, Inc.	200,787			209,456			—		173,795			70,834			(454,085		)	200,787
Preferred stock dividends	(7,207		)	—			—		—			—			—			(7,207		)
Net income attributable to common stockholders	$	193,580		$	209,456		$	—	$	173,795		$	70,834		$	(454,085	)	$	193,580		$	83,677	$	91,406		$	—	$	81,360		$	51,716		$	(224,482	)	$	83,677

Net income attributable to common stockholders, per:
Basic common share																		$	1.09																		$	0.46
Diluted common share																		$	1.08																		$	0.46
Weighted-average number of common shares outstanding, basic																		178,314,750																			181,567,464
Weighted-average number of common shares outstanding, diluted																		178,684,024																			182,254,100


⁽¹⁾	The Parent Company guarantees the ~~2021~~2023 Notes, the ~~2023~~2024 Notes and the 2026 Notes.


⁽²⁾	The Operating Partnership is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes and the issuer of the 2026 Notes.


⁽³⁾	Sabra Capital Corporation is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁴⁾	The Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁵⁾	The Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes consist of the subsidiaries that do not guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁶⁾	None of Sabra Capital Corporation, the Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes, nor the Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the 2026 Notes.

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Three Months EndedJune 30, ~~2017~~2018

(dollars in thousands, except per share amounts)

(unaudited)



							Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾
	Parent Company⁽¹⁾			Operating Partnership⁽²⁾			Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁴⁾			Combined Non- Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁵⁾			Elimination			Consolidated
Revenues:
Rental and related revenues	$	—		$	—		$	—	$	36,355		$	112,194		$	(4,320	)	$	144,229
Interest and other income	40			96			—		1,180			3,333			(96		)	4,553
Resident fees and services	—			—			—		—			17,530			—			17,530
Total revenues	40			96			—		37,535			133,057			(4,416		)	166,312
Expenses:
Depreciation and amortization	222			—			—		11,795			34,811			—			46,828
Interest	—			33,415			—		810			2,628			(96		)	36,757
Senior housing - managed portfolio operating expenses	—			—			—		—			16,619			(4,320		)	12,299
General and administrative	8,121			14			—		368			880			—			9,383
Provision for (recovery of) doubtful accounts, straight-line rental income and loan losses	311			—			—		(985		)	—			—			(674		)
Impairment of real estate	—			—			—		881			—			—			881
Total expenses	8,654			33,429			—		12,869			54,938			(4,416		)	105,474
Other income:
Other income (expense)	—			32			—		(32		)	—			—			—
Net gain on sales of real estate	—			—			—		41,520			101,383			—			142,903
Total other income	—			32			—		41,488			101,383			—			142,903
Income in subsidiary	209,456			242,758			—		1,871			—			(454,085		)	—
Income before loss from unconsolidated joint venture and income tax expense	200,842			209,457			—		68,025			179,502			(454,085		)	203,741
Loss from unconsolidated joint venture	—			—			—		—			(2,347		)	—			(2,347		)
Income tax expense	(55		)	(1		)	—		(489		)	(60		)	—			(605		)
Net income	200,787			209,456			—		67,536			177,095			(454,085		)	200,789
Net income attributable to noncontrolling interests	—			—			—		—			(2		)	—			(2		)
Net income attributable to Sabra Health Care REIT, Inc.	200,787			209,456			—		67,536			177,093			(454,085		)	200,787
Preferred stock dividends	(7,207		)	—			—		—			—			—			(7,207		)
Net income attributable to common stockholders	$	193,580		$	209,456		$	—	$	67,536		$	177,093		$	(454,085	)	$	193,580
Net income attributable to common stockholders, per:
Basic common share																		$	1.09
Diluted common share																		$	1.08
Weighted-average number of common shares outstanding, basic																		178,314,750
Weighted-average number of common shares outstanding, diluted																		178,684,024

Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾

Parent
Company⁽¹⁾

Operating Partnership⁽²⁾

Sabra Capital Corporation⁽³⁾

Combined
Guarantor
Subsidiaries of 2021 Notes and 2023 Notes⁽⁴⁾

Combined Non-
Guarantor
Subsidiaries of 2021 Notes and 2023 Notes⁽⁵⁾
Elimination Consolidated
Revenues:
Rental income $ —
$ —
$ —
$ 52,442
$ 4,656
$ (1,194 ) $ 55,904
Interest and other income 6
—
—
2,039
—
(18 ) 2,027
Resident fees and services —
—
—
—
6,805
—
6,805
Total revenues 6
—
—
54,481
11,461
(1,212 ) 64,736
Expenses:
Depreciation and amortization 216
—
—
15,425
1,579
—
17,220
Interest —
13,516
—
715
1,631
—
15,862
Operating expenses —
—
—
—
5,619
(1,212 ) 4,407
General and administrative 4,063
17
—
991
55
—
5,126
Merger and acquisition costs 5,883
—
—
4
—
—
5,887
Provision for doubtful accounts and loan losses
227
—
—
308
—
—
535
Total expenses 10,389
13,533
—
17,443
8,884
(1,212 ) 49,037
Other income (expense):
Other income (expense) 916
703
—
(665 ) (13 ) —
941
Net gain on sales of real estate —
—
—
4,026
6
—
4,032
Total other income (expense) 916
703
—
3,361
(7 ) —
4,973
Income in subsidiary 29,894
42,724
—
1,785
—
(74,403 ) —
Income before income tax benefit (expense) 20,427
29,894
—
42,184
2,570
(74,403 ) 20,672
Income tax benefit (expense) 93
—
—
(227 ) (2 ) —
(136 )
Net income 20,520
29,894
—
41,957
2,568
(74,403 ) 20,536
Net income attributable to noncontrolling interests —
—
—
—
(16 ) —
(16 )
Net income attributable to Sabra Health Care REIT, Inc. 20,520
29,894
—
41,957
2,552
(74,403 ) 20,520
Preferred stock dividends (2,560 ) —
—
—
—
—
(2,560 )
Net income attributable to common stockholders $ 17,960
$ 29,894
$ —
$ 41,957
$ 2,552
$ (74,403 ) $ 17,960

Net income attributable to common stockholders, per:
Basic common share $ 0.27
Diluted common share $ 0.27
Weighted-average number of common shares outstanding, basic 65,438,739
Weighted-average number of common shares outstanding, diluted 65,670,853


⁽¹⁾	The Parent Company guarantees the ~~2021~~2023 Notes, the ~~2023~~2024 Notes and the 2026 Notes.


⁽²⁾	The Operating Partnership is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes and the issuer of the 2026 Notes.


⁽³⁾	Sabra Capital Corporation is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁴⁾	The Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁵⁾	The Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes consist of the subsidiaries that do not guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁶⁾	None of Sabra Capital Corporation, the Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes, nor the Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the 2026 Notes.

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Six Months Ended June 30, ~~2018~~2019

(dollars in thousands, except per share amounts)

(unaudited)


							Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾																				Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾
	Parent Company⁽¹⁾			Operating Partnership⁽²⁾			Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2021 Notes and 2023 Notes⁽⁴⁾			Combined Non- Guarantor Subsidiaries of 2021 Notes and 2023 Notes⁽⁵⁾			Elimination			Consolidated			Parent Company⁽¹⁾			Operating Partnership⁽²⁾			Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁴⁾			Combined Non- Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁵⁾			Elimination			Consolidated
Revenues:
Rental income	$	—		$	—		$	—	$	90,024		$	207,013		$	(8,553	)	$	288,484
Rental and related revenues																					$	—		$	—		$	—	$	59,398		$	183,536		$	(13,747	)	$	229,187
Interest and other income	50			208			—		2,465			6,376			(208		)	8,891			120			1,991			—		69,429			4,271			(1,991		)	73,820
Resident fees and services	—			—			—		—			35,023			—			35,023			—			—			—		—			53,132			—			53,132
Total revenues	50			208			—		92,489			248,412			(8,761		)	332,398			120			1,991			—		128,827			240,939			(15,738		)	356,139
Expenses:
Depreciation and amortization	443			—			—		29,076			65,314			—			94,833			24			—			—		27,241			67,160			—			94,425
Interest	—			65,980			—		1,601			5,202			(208		)	72,575			—			65,891			—		3,567			2,459			(1,991		)	69,926
Operating expenses	—			—			—		—			32,976			(8,553		)	24,423
Triple-net portfolio operating expenses																					—			—			—		1,170			10,359			—			11,529
Senior housing - managed portfolio operating expenses																					—			—			—		—			50,026			(13,747		)	36,279
General and administrative	13,831			29			—		810			2,468			—			17,138			15,236			62			—		276			669			—			16,243
Merger and acquisition costs	448			—			—		—			(6		)	—			442
Provision for (recovery of) doubtful accounts and loan losses	2,492			—			—		(1,956		)	3			—			539
Provision for doubtful accounts, straight-line rental income and loan losses																					166			—			—		—			1,234			—			1,400
Impairment of real estate	—			—			—		1,413			—			—			1,413			—			—			—		—			105,136			—			105,136
Total expenses	17,214			66,009			—		30,944			105,957			(8,761		)	211,363			15,426			65,953			—		32,254			237,043			(15,738		)	334,938
Other income:
Other income	1,977			233			—		378			232			—			2,820
Net gain on sales of real estate	—			—			—		141,862			569			—			142,431
Total other income	1,977			233			—		142,240			801			—			145,251
Other (expense) income:
Loss on extinguishment of debt																					—			(10,119		)	—		—			—			—			(10,119		)
Other (expense) income																					—			(608		)	—		601			177			—			170
Net (loss) gain on sales of real estate																					—			—			—		(180		)	1,415			—			1,235
Total other (expense) income																					—			(10,727		)	—		421			1,592			—			(8,714		)
Income in subsidiary	278,798			344,367			—		3,725			—			(626,890		)	—			21,629			96,318			—		3,361			—			(121,308		)	—
Income before loss from unconsolidated joint venture and income tax expense	263,611			278,799			—		207,510			143,256			(626,890		)	266,286			6,323			21,629			—		100,355			5,488			(121,308		)	12,487
Loss from unconsolidated joint venture	—			—			—		—			(1,901		)	—			(1,901		)	—			—			—		—			(5,030		)	—			(5,030		)
Income tax expense	(353		)	(1		)	—		(542		)	(219		)	—			(1,115		)	(350		)	—			—		(647		)	(469		)	—			(1,466		)
Net income	263,258			278,798			—		206,968			141,136			(626,890		)	263,270			5,973			21,629			—		99,708			(11		)	(121,308		)	5,991
Net income attributable to noncontrolling interests	—			—			—		—			(12		)	—			(12		)	—			—			—		—			(18		)	—			(18		)
Net income attributable to Sabra Health Care REIT, Inc.	263,258			278,798			—		206,968			141,124			(626,890		)	263,258
Preferred stock dividends	(9,768		)	—			—		—			—			—			(9,768		)
Net income attributable to common stockholders	$	253,490		$	278,798		$	—	$	206,968		$	141,124		$	(626,890	)	$	253,490		$	5,973		$	21,629		$	—	$	99,708		$	(29	)	$	(121,308	)	$	5,973
Net income attributable to common stockholders, per:
Basic common share																		$	1.42																			$	0.03
Diluted common share																		$	1.42																			$	0.03
Weighted-average number of common shares outstanding, basic																		178,304,733																				179,984,959
Weighted-average number of common shares outstanding, diluted																		178,600,789																				180,637,059


⁽¹⁾	The Parent Company guarantees the ~~2021~~2023 Notes, the ~~2023~~2024 Notes and the 2026 Notes.


⁽²⁾	The Operating Partnership is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes and the issuer of the 2026 Notes.


⁽³⁾	Sabra Capital Corporation is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁴⁾	The Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁵⁾	The Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes consist of the subsidiaries that do not guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁶⁾	None of Sabra Capital Corporation, the Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes, nor the Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the 2026 Notes.

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Six Months Ended June 30, ~~2017~~2018

(dollars in thousands, except per share amounts)

(unaudited)


							Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾																				Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾
	Parent Company⁽¹⁾			Operating Partnership⁽²⁾			Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2021 Notes and 2023 Notes⁽⁴⁾			Combined Non- Guarantor Subsidiaries of 2021 Notes and 2023 Notes⁽⁵⁾			Elimination			Consolidated			Parent Company⁽¹⁾			Operating Partnership⁽²⁾			Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁴⁾			Combined Non- Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁵⁾			Elimination			Consolidated
Revenues:
Rental income	$	—		$	—		$	—	$	105,481		$	9,625		$	(1,978	)	$	113,128
Rental and related revenues																					$	—		$	—		$	—	$	71,569		$	225,468		$	(8,553	)	$	288,484
Interest and other income	13			—			—		3,977			—			(18		)	3,972			50			208			—		2,413			6,428			(208		)	8,891
Resident fees and services	—			—			—		—			10,286			—			10,286			—			—			—		—			35,023			—			35,023
Total revenues	13			—			—		109,458			19,911			(1,996		)	127,386			50			208			—		73,982			266,919			(8,761		)	332,398
Expenses:
Depreciation and amortization	432			—			—		32,381			3,544			—			36,357			443			—			—		24,130			70,260			—			94,833
Interest	—			26,924			—		1,445			3,281			—			31,650			—			65,980			—		1,601			5,202			(208		)	72,575
Operating expenses	—			—			—		—			8,823			(1,996		)	6,827
Senior housing - managed portfolio operating expenses																					—			—			—		—			32,976			(8,553		)	24,423
General and administrative	9,322			31			—		1,758			104			—			11,215			14,279			29			—		783			2,489			—			17,580
Merger and acquisition costs	6,417			—			—		34			—			—			6,451
Provision for doubtful accounts and loan losses	82			—			—		2,223			—			—			2,305
Provision for (recovery of) doubtful accounts, straight-line rental income and loan losses																					2,492			—			—		(1,956		)	3			—			539
Impairment of real estate																					—			—			—		1,413			—			—			1,413
Total expenses	16,253			26,955			—		37,841			15,752			(1,996		)	94,805			17,214			66,009			—		25,971			110,930			(8,761		)	211,363
Other income:
Other income	2,283			737			—		50			—			—			3,070			1,977			233			—		378			232			—			2,820
Net gain on sales of real estate	—			—			—		4,026			6			—			4,032			—			—			—		41,520			100,911			—			142,431
Total other income	2,283			737			—		4,076			6			—			7,102			1,977			233			—		41,898			101,143			—			145,251
Income in subsidiary	53,331			79,550			—		3,564			—			(136,445		)	—			278,798			344,367			—		3,725			—			(626,890		)	—
Income before income tax expense	39,374			53,332			—		79,257			4,165			(136,445		)	39,683
Income before loss from unconsolidated joint venture and income tax expense																					263,611			278,799			—		93,634			257,132			(626,890		)	266,286
Loss from unconsolidated joint venture																					—			—			—		—			(1,901		)	—			(1,901		)
Income tax expense	(31		)	(1		)	—		(227		)	(97		)	—			(356		)	(353		)	(1		)	—		(542		)	(219		)	—			(1,115		)
Net income	39,343			53,331			—		79,030			4,068			(136,445		)	39,327			263,258			278,798			—		93,092			255,012			(626,890		)	263,270
Net loss attributable to noncontrolling interests	—			—			—		—			16			—			16
Net income attributable to noncontrolling interests																					—			—			—		—			(12		)	—			(12		)
Net income attributable to Sabra Health Care REIT, Inc.	39,343			53,331			—		79,030			4,084			(136,445		)	39,343			263,258			278,798			—		93,092			255,000			(626,890		)	263,258
Preferred stock dividends	(5,121		)	—			—		—			—			—			(5,121		)	(9,768		)	—			—		—			—			—			(9,768		)
Net income attributable to common stockholders	$	34,222		$	53,331		$	—	$	79,030		$	4,084		$	(136,445	)	$	34,222		$	253,490		$	278,798		$	—	$	93,092		$	255,000		$	(626,890	)	$	253,490
Net income attributable to common stockholders, per:
Basic common share																		$	0.52																			$	1.42
Diluted common share																		$	0.52																			$	1.42
Weighted-average number of common shares outstanding, basic																		65,396,146																				178,304,733
Weighted-average number of common shares outstanding, diluted																		65,694,019																				178,600,789


⁽¹⁾	The Parent Company guarantees the ~~2021~~2023 Notes, the ~~2023~~2024 Notes and the 2026 Notes.


⁽²⁾	The Operating Partnership is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes and the issuer of the 2026 Notes.


⁽³⁾	Sabra Capital Corporation is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁴⁾	The Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁵⁾	The Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes consist of the subsidiaries that do not guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁶⁾	None of Sabra Capital Corporation, the Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes, nor the Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the 2026 Notes.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE (LOSS) INCOME

For the Three Months EndedJune 30, ~~2018~~2019

(dollars in thousands)

(unaudited)


					Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾																			Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾
	Parent Company⁽¹⁾		Operating Partnership⁽²⁾		Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2021 Notes and 2023 Notes⁽⁴⁾			Combined Non- Guarantor Subsidiaries of 2021 Notes and 2023 Notes⁽⁵⁾			Elimination			Consolidated			Parent Company⁽¹⁾		Operating Partnership⁽²⁾			Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁴⁾		Combined Non- Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁵⁾			Elimination			Consolidated
Net income	$	200,787	$	209,456	$	—	$	173,795		$	70,836		$	(454,085	)	$	200,789		$	83,677	$	91,406		$	—	$	81,360	$	51,722		$	(224,482	)	$	83,683
Other comprehensive income (loss):
Unrealized gain (loss), net of tax:
Foreign currency translation gain (loss)	—		1,064		—		(608		)	(195		)	—			261
Unrealized gain on cash flow hedges	—		3,335		—		3			—			—			3,338
Total other comprehensive income (loss)	—		4,399		—		(605		)	(195		)	—			3,599
Foreign currency translation (loss) gain																			—		(264		)	—		629		202			—			567
Unrealized (loss) gain on cash flow hedges																			—		(9,808		)	—		52		—			—			(9,756		)
Total other comprehensive (loss) income																			—		(10,072		)	—		681		202			—			(9,189		)
Comprehensive income	200,787		213,855		—		173,190			70,641			(454,085		)	204,388			83,677		81,334			—		82,041		51,924			(224,482		)	74,494
Comprehensive income attributable to noncontrolling interest	—		—		—		—			(2		)	—			(2		)	—		—			—		—		(6		)	—			(6		)
Comprehensive income attributable to Sabra Health Care REIT, Inc.	$	200,787	$	213,855	$	—	$	173,190		$	70,639		$	(454,085	)	$	204,386		$	83,677	$	81,334		$	—	$	82,041	$	51,918		$	(224,482	)	$	74,488


⁽¹⁾	The Parent Company guarantees the ~~2021~~2023 Notes, the ~~2023~~2024 Notes and the 2026 Notes.


⁽²⁾	The Operating Partnership is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes and the issuer of the 2026 Notes.


⁽³⁾	Sabra Capital Corporation is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁴⁾	The Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁵⁾	The Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes consist of the subsidiaries that do not guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁶⁾	None of Sabra Capital Corporation, the Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes, nor the Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the 2026 Notes.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the Three Months Ended June 30, ~~2017~~2018

(dollars in thousands)

(unaudited)


						Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾																		Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾
	Parent Company⁽¹⁾		Operating Partnership⁽²⁾			Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2021 Notes and 2023 Notes⁽⁴⁾			Combined Non- Guarantor Subsidiaries of 2021 Notes and 2023 Notes⁽⁵⁾			Elimination			Consolidated			Parent Company⁽¹⁾		Operating Partnership⁽²⁾		Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁴⁾			Combined Non- Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁵⁾			Elimination			Consolidated
Net income	$	20,520	$	29,894		$	—	$	41,957		$	2,568		$	(74,403	)	$	20,536		$	200,787	$	209,456	$	—	$	67,536		$	177,095		$	(454,085	)	$	200,789
Other comprehensive (loss) income:
Other comprehensive income (loss):
Unrealized gain (loss), net of tax:
Foreign currency translation (loss) gain	—		(415		)	—		833			280			—			698
Unrealized gain (loss) on cash flow hedges	—		285			—		(188		)	—			—			97
Total other comprehensive (loss) income	—		(130		)	—		645			280			—			795
Foreign currency translation gain (loss)																				—		1,064		—		(608		)	(195		)	—			261
Unrealized gain on cash flow hedges																				—		3,335		—		3			—			—			3,338
Total other comprehensive income (loss)																				—		4,399		—		(605		)	(195		)	—			3,599
Comprehensive income	20,520		29,764			—		42,602			2,848			(74,403		)	21,331			200,787		213,855		—		66,931			176,900			(454,085		)	204,388
Comprehensive income attributable to noncontrolling interest	—		—			—		—			(16		)	—			(16		)	—		—		—		—			(2		)	—			(2		)
Comprehensive income attributable to Sabra Health Care REIT, Inc.	$	20,520	$	29,764		$	—	$	42,602		$	2,832		$	(74,403	)	$	21,315		$	200,787	$	213,855	$	—	$	66,931		$	176,898		$	(454,085	)	$	204,386


⁽¹⁾	The Parent Company guarantees the ~~2021~~2023 Notes, the ~~2023~~2024 Notes and the 2026 Notes.


⁽²⁾	The Operating Partnership is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes and the issuer of the 2026 Notes.


⁽³⁾	Sabra Capital Corporation is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁴⁾	The Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁵⁾	The Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes consist of the subsidiaries that do not guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁶⁾	None of Sabra Capital Corporation, the Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes, nor the Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the 2026 Notes.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE (LOSS) INCOME

For the Six Months Ended June 30, ~~2018~~2019

(dollars in thousands)

(unaudited)



						Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾
	Parent Company⁽¹⁾		Operating Partnership⁽²⁾			Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁴⁾		Combined Non- Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁵⁾			Elimination			Consolidated
Net income	$	5,973	$	21,629		$	—	$	99,708	$	(11	)	$	(121,308	)	$	5,991
Other comprehensive income (loss):
Unrealized gain (loss), net of tax:
Foreign currency translation (loss) gain	—		(1,700		)	—		1,307		400			—			7
Unrealized (loss) gain on cash flow hedges	—		(23,294		)	—		50		—			—			(23,244		)
Total other comprehensive (loss) income	—		(24,994		)	—		1,357		400			—			(23,237		)
Comprehensive income (loss)	5,973		(3,365		)	—		101,065		389			(121,308		)	(17,246		)
Comprehensive income attributable to noncontrolling interest	—		—			—		—		(18		)	—			(18		)
Comprehensive income (loss) attributable to Sabra Health Care REIT, Inc.	$	5,973	$	(3,365	)	$	—	$	101,065	$	371		$	(121,308	)	$	(17,264	)


⁽¹⁾	The Parent Company guarantees the ~~2021~~2023 Notes, the ~~2023~~2024 Notes and the 2026 Notes.


⁽²⁾	The Operating Partnership is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes and the issuer of the 2026 Notes.


⁽³⁾	Sabra Capital Corporation is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁴⁾	The Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁵⁾	The Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes consist of the subsidiaries that do not guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁶⁾	None of Sabra Capital Corporation, the Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes, nor the Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the 2026 Notes.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the Six Months Ended June 30, ~~2017~~2018

(dollars in thousands)

(unaudited)


						Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾																Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾
	Parent Company⁽¹⁾		Operating Partnership⁽²⁾			Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2021 Notes and 2023 Notes⁽⁴⁾			Combined Non- Guarantor Subsidiaries of 2021 Notes and 2023 Notes⁽⁵⁾		Elimination			Consolidated		Parent Company⁽¹⁾		Operating Partnership⁽²⁾		Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁴⁾			Combined Non- Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁵⁾			Elimination			Consolidated
Net income	$	39,343	$	53,331		$	—	$	79,030		$	4,068	$	(136,445	)	$	39,327	$	263,258	$	278,798	$	—	$	93,092		$	255,012		$	(626,890	)	$	263,270
Other comprehensive (loss) income:
Other comprehensive income (loss):
Unrealized gain (loss), net of tax:
Foreign currency translation (loss) gain	—		(1,367		)	—		1,131			376		—			140
Foreign currency translation gain (loss)																		—		1,905		—		(1,536		)	(482		)	—			(113		)
Unrealized gain (loss) on cash flow hedges	—		1,013			—		(188		)	—		—			825		—		13,238		—		(2		)	—			—			13,236
Total other comprehensive (loss) income	—		(354		)	—		943			376		—			965
Total other comprehensive income (loss)																		—		15,143		—		(1,538		)	(482		)	—			13,123
Comprehensive income	39,343		52,977			—		79,973			4,444		(136,445		)	40,292		263,258		293,941		—		91,554			254,530			(626,890		)	276,393
Comprehensive loss attributable to noncontrolling interest	—		—			—		—			16		—			16
Comprehensive income attributable to noncontrolling interest																		—		—		—		—			(12		)	—			(12		)
Comprehensive income attributable to Sabra Health Care REIT, Inc.	$	39,343	$	52,977		$	—	$	79,973		$	4,460	$	(136,445	)	$	40,308	$	263,258	$	293,941	$	—	$	91,554		$	254,518		$	(626,890	)	$	276,381


⁽¹⁾	The Parent Company guarantees the ~~2021~~2023 Notes, the ~~2023~~2024 Notes and the 2026 Notes.


⁽²⁾	The Operating Partnership is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes and the issuer of the 2026 Notes.


⁽³⁾	Sabra Capital Corporation is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁴⁾	The Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁵⁾	The Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes consist of the subsidiaries that do not guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁶⁾	None of Sabra Capital Corporation, the Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes, nor the Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the 2026 Notes.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, ~~2018~~2019

(in thousands)

(unaudited)


							Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾																				Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾
	Parent Company⁽¹⁾			Operating Partnership⁽²⁾			Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2021 Notes and 2023 Notes⁽⁴⁾			Combined Non- Guarantor Subsidiaries of 2021 Notes and 2023 Notes⁽⁵⁾			Elimination			Consolidated			Parent Company⁽¹⁾			Operating Partnership⁽²⁾			Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁴⁾			Combined Non- Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁵⁾			Elimination			Consolidated
Net cash provided by operating activities	$	204,440		$	—		$	—	$	1,041		$	6,072		$	—		$	211,553
Net cash (used in) provided by operating activities																					$	185,681		$	—		$	—	$	438		$	5,759		$	—		$	191,878
Cash flows from investing activities:
Acquisition of real estate	—			—			—		(29,711		)	(184,271		)	—			(213,982		)
Origination and fundings of loans receivable	—			—			—		(1,973		)	(26,184		)	—			(28,157		)	—			—			—		(5,400		)	(3,423		)	—			(8,823		)
Origination and fundings of preferred equity investments	—			—			—		(945		)	—			—			(945		)
Additions to real estate	(40		)	—			—		(4,660		)	(12,117		)	—			(16,817		)	—			—			—		(4,009		)	(4,587		)	—			(8,596		)
Repayments of loans receivable	—			—			—		6,577			32,310			—			38,887			—			—			—		92			10,010			—			10,102
Repayments of preferred equity investments	—			—			—		375			—			—			375			—			—			—		2,463			—			—			2,463
Investment in unconsolidated JV	—			—			—		—			(354,461		)	—			(354,461		)
Net proceeds from the sales of real estate	—			—			—		232,059			46,142			—			278,201			—			—			—		22,605			300,131			—			322,736
Distribution from subsidiaries	2,669			2,669			—		—			—			(5,338		)	—			2,531			2,531			—		—			—			(5,062		)	—
Intercompany financing	(378,485		)	(413,473		)	—		—			—			791,958			—			(240,387		)	319,921			—		—			—			(79,534		)	—
Net cash (used in) provided by investing activities	(375,856		)	(410,804		)	—		201,722			(498,581		)	786,620			(296,899		)	(237,856		)	322,452			—		15,751			302,131			(84,596		)	317,882
Cash flows from financing activities:
Net borrowings from revolving credit facility	—			35,000			—		—			—			—			35,000
Net repayments of revolving credit facility																					—			(349,000		)	—		—			—			—			(349,000		)
Proceeds from issuance of senior unsecured notes																					—			300,000			—		—			—			—			300,000
Principal payments on senior unsecured notes																					—			(500,000		)			—			—			—			(500,000		)
Principal payments on secured debt	—			—			—		—			(2,128		)	—			(2,128		)	—			—			—		—			(1,703		)	—			(1,703		)
Payments of deferred financing costs	—			(12		)	—		—			—			—			(12		)	—			(4,413		)	—		—			—			—			(4,413		)
Payments related to extinguishment of debt																					—			(6,895		)	—		—			—			—			(6,895		)
Distributions to noncontrolling interest	—			—			—		—			(72		)	—			(72		)	—			—			—		—			(73		)	—			(73		)
Preferred stock redemption	(143,750		)	—			—		—			—			—			(143,750		)
Issuance of common stock, net	(499		)	—			—		—			—			—			(499		)	211,575			—			—		—			—			—			211,575
Dividends paid on common and preferred stock	(164,736		)	—			—		—			—			—			(164,736		)
Dividends paid on common stock																					(161,735		)	—			—		—			—			—			(161,735		)
Distribution to parent	—			(2,669		)	—		—			(2,669		)	5,338			—			—			(2,531		)	—		—			(2,531		)	5,062			—
Intercompany financing	—			378,485			—		(63,658		)	477,131			(791,958		)	—			—			240,387			—		(17,230		)	(302,691		)	79,534			—
Net cash (used in) provided by financing activities	(308,985		)	410,804			—		(63,658		)	472,262			(786,620		)	(276,197		)
Net cash provided by (used in) financing activities																					49,840			(322,452		)	—		(17,230		)	(306,998		)	84,596			(512,244		)
Net (decrease) increase in cash, cash equivalents and restricted cash	(480,401		)	—			—		139,105			(20,247		)	—			(361,543		)	(2,335		)	—			—		(1,041		)	892			—			(2,484		)
Effect of foreign currency translation on cash, cash equivalents and restricted cash	—			—			—		(146		)	(106		)	—			(252		)	—			—			—		198			102			—			300
Cash, cash equivalents and restricted cash, beginning of period	511,670			—			—		37,359			38,420			—			587,449			40,835			—			—		5,328			13,495			—			59,658
Cash, cash equivalents and restricted cash, end of period	$	31,269		$	—		$	—	$	176,318		$	18,067		$	—		$	225,654		$	38,500		$	—		$	—	$	4,485		$	14,489		$	—		$	57,474


⁽¹⁾	The Parent Company guarantees the ~~2021~~2023 Notes, the ~~2023~~2024 Notes and the 2026 Notes.


⁽²⁾	The Operating Partnership is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes and the issuer of the 2026 Notes.


⁽³⁾	Sabra Capital Corporation is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁴⁾	The Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁵⁾	The Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes consist of the subsidiaries that do not guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁶⁾	None of Sabra Capital Corporation, the Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes, nor the Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the 2026 Notes.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, ~~2017~~2018

(in thousands)

(unaudited)



							Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾
	Parent Company⁽¹⁾			Operating Partnership⁽²⁾			Sabra Capital Corporation⁽³⁾		Combined Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁴⁾			Combined Non- Guarantor Subsidiaries of 2023 Notes and 2024 Notes⁽⁵⁾			Elimination			Consolidated
Net cash provided by operating activities	$	204,440		$	—		$	—	$	1,014		$	6,099		$	—		$	211,553
Cash flows from investing activities:
Acquisition of real estate	—			—			—		(29,711		)	(184,271		)	—			(213,982		)
Origination and fundings of loans receivable	—			—			—		(1,973		)	(26,184		)	—			(28,157		)
Origination and fundings of preferred equity investments	—			—			—		(945		)	—			—			(945		)
Additions to real estate	(40		)	—			—		(4,660		)	(12,117		)	—			(16,817		)
Repayments of loans receivable	—			—			—		6,577			32,310			—			38,887
Repayments of preferred equity investments	—			—			—		375			—			—			375
Investment in unconsolidated JV	—			—			—		—			(354,461		)	—			(354,461		)
Net proceeds from the sales of real estate	—			—			—		78,072			200,129			—			278,201
Distribution from subsidiaries	2,669			2,669			—		—			—			(5,338		)	—
Intercompany financing	(378,485		)	(413,473		)	—		—			—			791,958			—
Net cash (used in) provided by investing activities	(375,856		)	(410,804		)	—		47,735			(344,594		)	786,620			(296,899		)
Cash flows from financing activities:
Net borrowings from revolving credit facility	—			35,000			—		—			—			—			35,000
Principal payments on secured debt	—			—			—		—			(2,128		)	—			(2,128		)
Payments of deferred financing costs	—			(12		)	—		—			—			—			(12		)
Distributions to noncontrolling interest	—			—			—		—			(72		)	—			(72		)
Preferred stock redemption	(143,750		)	—			—		—			—			—			(143,750		)
Issuance of common stock, net	(499		)	—			—		—			—			—			(499		)
Dividends paid on common and preferred stock	(164,736		)	—			—		—			—			—			(164,736		)
Distribution to parent	—			(2,669		)	—		—			(2,669		)	5,338			—
Intercompany financing	—			378,485			—		(8,130		)	421,603			(791,958		)	—
Net cash (used in) provided by financing activities	(308,985		)	410,804			—		(8,130		)	416,734			(786,620		)	(276,197		)
Net (decrease) increase in cash, cash equivalents and restricted cash	(480,401		)	—			—		40,619			78,239			—			(361,543		)
Effect of foreign currency translation on cash, cash equivalents and restricted cash	—			—			—		(146		)	(106		)	—			(252		)
Cash, cash equivalents and restricted cash, beginning of period	511,670			—			—		6,761			69,018			—			587,449
Cash, cash equivalents and restricted cash, end of period	$	31,269		$	—		$	—	$	47,234		$	147,151		$	—		$	225,654

Combined Non-Guarantor Subsidiaries of 2026 Notes⁽⁶⁾

Parent
Company⁽¹⁾

Operating Partnership⁽²⁾

Sabra Capital Corporation⁽³⁾

Combined
Guarantor
Subsidiaries of 2021 Notes and 2023 Notes⁽⁴⁾

Combined Non-
Guarantor
Subsidiaries of 2021 Notes and 2023 Notes⁽⁵⁾
Elimination Consolidated
Net cash provided by (used in) operating activities $ 49,670
$ —
$ —
$ (1,693 ) $ 6,305
$ —
$ 54,282
Cash flows from investing activities:
Acquisition of real estate —
—
—
(14,456 ) —
—
(14,456 )
Origination and fundings of loans receivable —
—
—
(927 ) —
—
(927 )
Origination and fundings of preferred equity investments —
—
—
(76 ) —
—
(76 )
Additions to real estate (12 ) —
—
(1,106 ) (176 ) —
(1,294 )
Repayments of loans receivable —
—
—
1,547
—
—
1,547
Repayments of preferred equity investments —
—
—
2,766
—
—
2,766
Net proceeds from the sale of real estate —
—
—
6,099
—
—
6,099
Distribution from subsidiaries 2,474
2,474
—
—
—
(4,948 ) —
Intercompany financing (1,667 ) (7,543 ) —
—
—
9,210
—
Net cash provided by (used in) investing activities 795
(5,069 ) —
(6,153 ) (176 ) 4,262
(6,341 )
Cash flows from financing activities:

Net borrowings from revolving credit facility —
6,000
—
—
—
—
6,000
Principal payments on secured debt —
—
—
—
(2,049 ) —
(2,049 )
Payments of deferred financing costs —
(124 ) —
—
—
—
(124 )
Issuance of common stock, net (3,224 ) —
—
—
—
—
(3,224 )
Dividends paid on common and preferred stock (60,691 ) —
—
—
—
—
(60,691 )
Distribution to parent —
(2,474 ) —
—
(2,474 ) 4,948
—
Intercompany financing —
1,667
—
7,543
—
(9,210 ) —
Net cash (used in) provided by financing activities (63,915 ) 5,069
—
7,543
(4,523 ) (4,262 ) (60,088 )
Net (decrease) increase in cash, cash equivalents and restricted cash (13,450 ) —
—
(303 ) 1,606
—
(12,147 )
Effect of foreign currency translation on cash, cash equivalents and restricted cash —
—
—
69
61
—
130
Cash, cash equivalents and restricted cash, beginning of period 18,168
—
—
2,732
13,765
—
34,665
Cash, cash equivalents and restricted cash, end of period $ 4,718
$ —
$ —
$ 2,498
$ 15,432
$ —
$ 22,648


⁽¹⁾	The Parent Company guarantees the ~~2021~~2023 Notes, the ~~2023~~2024 Notes and the 2026 Notes.


⁽²⁾	The Operating Partnership is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes and the issuer of the 2026 Notes.


⁽³⁾	Sabra Capital Corporation is the co-issuer of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁴⁾	The Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁵⁾	The Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes consist of the subsidiaries that do not guarantee the ~~2021~~2023 Notes and the ~~2023~~2024 Notes.


⁽⁶⁾	None of Sabra Capital Corporation, the Combined Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes, nor the Combined Non-Guarantor Subsidiaries of the ~~2021~~2023 Notes and the ~~2023~~2024 Notes guarantee the 2026 Notes.

13. COMMITMENTS AND CONTINGENCIES

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities. As of June 30, ~~2018,~~2019, the Company does not expect that compliance with existing environmental laws will have a material adverse effect on the Company’s financial condition and results of operations.

Legal Matters

From time to time, the Company is party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings where the likelihood of a loss contingency is reasonably possible and the amount or range of reasonably possible losses is material to the Company’s results of operations, financial condition or cash flows.

14. SUBSEQUENT EVENTS

The Company evaluates subsequent events up until the date the condensed consolidated financial statements are issued.

Dividend Declaration

On August ~~8, 2018,~~7, 2019, the Company announced that its board of directors declared a quarterly cash dividend of $0.45 per share of common stock. The dividend will be paid on August ~~31, 2018~~30, 2019 to common stockholders of record as of the close of business on August ~~18, 2018.~~20, 2019.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The discussion below contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those which are discussed in the “Risk Factors” section in Part I, Item 1A of our ~~2017~~2018 Annual Report on Form ~~10-K.~~10-K and Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019. Also see “Statement Regarding Forward-Looking Statements” preceding Part I.

The following discussion and analysis should be read in conjunction with our accompanying condensed consolidated financial statements and the notes thereto.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is organized as follows:

Overview

Critical Accounting Policies

Recently Issued Accounting Standards Update

Results of Operations

Liquidity and Capital Resources

Concentration of Credit Risk

Skilled Nursing Facility Reimbursement Rates

Obligations and Commitments

Off-Balance Sheet Arrangements

Overview

We operate as a self-administered, self-managed REIT that, through our subsidiaries, owns and invests in real estate serving the healthcare industry.

Our primary business consists of acquiring, financing and owning real estate property to be leased to third party tenants in the healthcare ~~sector using triple-net operating leases.~~sector. We primarily generate revenues by leasing properties to tenants and owning properties operated by third-party property managers throughout the United States (“U.S.”) and Canada.

Our investment portfolio is primarily comprised of skilled nursing/transitional care facilities, senior housing communities and specialty hospitals and other facilities, in each case leased to third-party operators; senior housing communities operated by third-party property managers pursuant to property management agreements (“Senior Housing - Managed”); investments in loans receivable; preferred equity investments and an investment in an unconsolidated joint venture.

In 2017 and ~~the first half of~~ 2018, we completed a series of transactions—including ~~the~~our merger with CCP ~~Merger (as defined below)~~(“CCP Merger”), sales of 67 facilities leased to Genesis Healthcare, Inc., investment in ~~the~~ an unconsolidated joint venture with Enlivant and TPG Real Estate (“Enlivant Joint ~~Venture (as defined below)~~Venture”) and entry into our new Credit Facility (as defined below)~~, each of which are discussed below—~~—that have significantly enhanced our scale and increased our diversification. Additionally, Sabra has substantially completed the repositioning of the CCP portfolio, which included a combination of lease modifications, working capital advances, transitioning facilities to other Sabra tenants and strategic sales or closures of underperforming facilities (including the sales of Senior Care Centers facilities described below under “—Dispositions”).

Following these transactions, we expect to continue to grow our investment portfolio while diversifying our portfolio by tenant, facility type and geography within the healthcare sector. We plan to achieve these objectives primarily through making investments directly or indirectly in healthcare real estate, including the development of purpose built healthcare facilities with select developers. We also intend to achieve our objective of diversifying our portfolio by tenant and facility type through select asset sales and other arrangements with ~~Genesis and other~~our tenants. During the six months ended June 30, 2018, we completed the sale of 37 facilities, including 27 facilities leased to Genesis, and expect to complete the sales of 19 of our remaining 27 Genesis facilities during the remainder of 2018 and to retain eight facilities, although we cannot provide assurance that the sales will be completed in that timeframe, if at all.

We expect to continue to grow our portfolio primarily through the acquisition of assisted living, independent living and memory care communities in the U.S. and Canada and through the acquisition of skilled nursing/transitional care and behavioral health facilities in the U.S. We have and expect to continue to opportunistically acquire other types of healthcare real estate, originate financing secured directly or indirectly by healthcare facilities and invest in the development of senior housing communities and skilled nursing/transitional care facilities. We also expect to expand our portfolio through the development of purpose-built healthcare facilities through pipeline agreements and other arrangements with select developers. We further expect to work with existing operators to identify strategic development opportunities. These opportunities may involve replacing, renovating or expanding facilities in our portfolio that may have become less competitive and new development

opportunities that present attractive risk-adjusted returns. In addition to pursuing acquisitions with triple-net leases, we expect to continue to pursue other forms of investment, including investments in Senior Housing - Managed communities, mezzanine and secured debt investments, and joint ventures for senior housing communities and skilled nursing/transitional care facilities.

We also expect to continue to enhance the strength of our investment portfolio by selectively disposing of underperforming facilities or working with new or existing operators to transfer underperforming but promising properties to new operators.

With respect to our debt and preferred equity investments, in general, we originate loans and make preferred equity investments when an attractive investment opportunity is presented and (a) the property is in or near the development phase, (b) the development of the property is completed but the operations of the facility are not yet stabilized or (c) the loan investment will provide capital to existing relationships. A key component of our development strategy related to loan originations and preferred equity investments is having the option to purchase the underlying real estate that is owned by our borrowers (and that directly or indirectly secures our loan investments) or by the entity in which we have an investment. These options become exercisable upon the occurrence of various criteria, such as the passage of time or the achievement of certain operating goals, and the method to determine the purchase price upon exercise of the option is set in advance based on the same valuation methods we use to value our investments in healthcare real estate. This proprietary development pipeline strategy allows us to diversify our revenue streams and build relationships with operators and developers, and provides us with the option to add new properties to our existing real estate portfolio if we determine that those properties enhance our investment portfolio and stockholder value at the time the options are exercisable.

We employ a disciplined, opportunistic approach in our healthcare real estate investment strategy by investing in assets that provide attractive opportunities for dividend growth and appreciation of asset values, while maintaining balance sheet strength and liquidity, thereby creating long-term stockholder value.

We elected to be treated as a REIT with the filing of our U.S. federal income tax return for the taxable year beginning January 1, 2011. We believe that we have been organized and have operated, and we intend to continue to operate, in a manner to qualify as a REIT. We operate through an umbrella partnership, commonly referred to as an UPREIT structure, in which substantially all of our properties and assets are held by Sabra Health Care Limited Partnership, a Delaware limited partnership (the “Operating Partnership”), of which we are the sole general partner and ~~our~~a wholly owned ~~subsidiaries are~~subsidiary of ours is currently the only limited ~~partners,~~partner, or by subsidiaries of the Operating Partnership.

~~Care Capital Properties, Inc. Merger~~

On May 7, 2017, Sabra, the Operating Partnership, PR Sub, LLC, a Delaware limited liability company and wholly owned subsidiary of Sabra (“Merger Sub”), Care Capital Properties, Inc., a Delaware corporation (“CCP”), and Care Capital Properties, L.P. (“CCPLP”), a Delaware limited partnership and wholly owned subsidiary of CCP, entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, on August 17, 2017, CCP merged with and into Merger Sub, with Merger Sub continuing as the surviving corporation (the “CCP Merger”), following which Merger Sub merged with and into Sabra, with Sabra continuing as the surviving entity (the “Subsequent Merger”), and, simultaneous with the Subsequent Merger, CCPLP merged with and into the Operating Partnership, with the Operating Partnership continuing as the surviving entity.

Pursuant to the Merger Agreement, as of the effective time of the CCP Merger, each share of CCP common stock, par value $0.01 per share, issued and outstanding immediately prior to the effective time of the CCP Merger (other than shares of CCP common stock owned directly by CCP, Sabra or their respective subsidiaries, in each case not held on behalf of third parties) was converted into the right to receive 1.123 newly issued shares of Company common stock, par value $0.01 per share, plus cash in lieu of any fractional shares.

~~The acquisition of CCP has been reflected in our consolidated financial statements since the effective date of the CCP~~

~~Merger.~~

On September 7, 2017, Sabra announced its strategy to reposition the CCP portfolio, which includes a combination of lease modifications (including between $28.2 million and $31.2 million of reduction in rents), working capital advances, transitioning facilities to other Sabra tenants and strategic sales or closures of underperforming facilities.

As a result of the CCP Merger, we have increased our tenant diversification by operator and geography, including decreasing concentration from our top five relationships. In addition, shortly following the closing of the CCP Merger, we received investment grade ratings from Standard & Poor’s and Fitch and a two notch upgrade from Moody’s, which provided an immediate improvement in our cost of debt under our Credit Facility.

~~See Note 3, “CCP Merger and Recent Real Estate Acquisitions” in the Notes to Condensed Consolidated Financial Statements for additional information regarding the CCP Merger.~~

~~Acquisitions~~

During the six months ended June 30, 2018, we acquired 11 Senior Housing - Managed communities managed by Enlivant, five senior housing communities and two skilled nursing/transitional care facilities for an aggregate $214.0 million. See Note 3, “CCP Merger and Recent Real Estate Acquisitions” in the Notes to Condensed Consolidated Financial Statements for additional information regarding these acquisitions.

Dispositions

During the six months ended June 30, ~~2018,~~2019, we completed the sale of 3331 skilled nursing/transitional care facilities and ~~four~~seven senior housing communities for aggregate consideration, net of closing costs, of ~~$278.3~~$315.0 million. The net carrying value of the assets and liabilities of these facilities was ~~$135.8~~$313.8 million, which resulted in an aggregate ~~$142.5~~$1.2 million net gain on sale.

~~Enlivant Joint Venture~~

On February 15, 2019, we entered into a settlement agreement with Senior Care Centers in connection with the notices of default and lease termination we issued to Senior Care Centers during the third quarter of 2018. In ~~addition~~accordance with the order entered by the bankruptcy court in March 2019, the settlement agreement provided for the discharge of our claims against Senior Care Centers in exchange for $9.5 million of settlement payments, a portion of which was applied to pay post-petition rent. We recorded $0.5 million and $6.2 million of such post-petition rent during the three and six months ended June 30, 2019, respectively. On April 1, 2019, we completed the sale of 28 facilities (26 skilled nursing/transitional care facilities and two senior housing communities) previously operated by Senior Care Centers and received gross sales proceeds of $282.5 million. In connection with the sale, we entered into an agreement to indemnify the buyer from certain costs, expenses and liabilities related to the ~~acquisition~~historical operations of 11the facilities by Senior Care Centers. In May 2019, we transitioned eight facilities previously operated by Senior Care Centers to a current operator in the Sabra portfolio, and we expect to sell the remaining two facilities operated by Senior Care Centers. During the six months ended June 30, 2019, we recorded an impairment charge of $92.2 million related to the Senior Care Centers facilities, which includes $10.2 million related to our estimated contractual indemnification obligations.

Holiday

On December 19, 2018, we entered into a letter of intent to terminate our triple-net master lease with Holiday Retirement (“Holiday”) with respect to all 21 senior housing communities subject to the master lease (the “Holiday Communities”) and concurrently enter into management agreements pursuant to which Holiday would manage the Holiday Communities. On April 1, 2019, we completed the conversion of the Holiday Communities to our Senior Housing - Managed ~~communities managed by Enlivant, on January 2, 2018,~~portfolio and recognized lease termination income of $66.9 million, which includes a $57.2 million lease termination payment received in exchange for terminating the Holiday master lease and a $9.7 million gain related to the assumption of fixed assets net of liabilities.

At-The-Market Common Stock Offering Program

On February 25, 2019, we established the $500.0 million ATM Program (as defined below). During the three and six months ended June 30, 2019, we sold 11.1 million shares under the ATM Program, generating gross proceeds of $217.3 million, before $3.3 million of commissions.

Senior Unsecured Notes

On May 29, 2019, we completed ~~our transaction with affiliates~~an underwritten public offering of ~~Enlivant~~$300.0 million aggregate principal amount of 4.80% senior unsecured notes due 2024, resulting in net proceeds of $295.3 million after deducting underwriting discounts and TPG Real Estate, the real estate platform of TPG, and contributed $352.7 million, before closing costs, to acquire a 49% equity interest in an entity that owns 172 senior housing communities managed by Enlivant (the “Enlivant Joint Venture”). At closing, the Enlivant Joint Venture had outstanding indebtedness of $791.3 million and net working capital of $22.9 million, and our investment in the Enlivant Joint Venture implied an aggregate portfolio value of $1.49 billion. We financed this investment with proceeds from our Revolving Credit Facility. The joint venture agreement includes an option for us to acquire the remainder of the outstanding equity interests in the Enlivant Joint Venture by January 2, 2021 and grants us the right of first offer if our partner in the Enlivant Joint Venture desires to transfer its equity interest (which it may do commencing on January 2, 2020). In addition, Sabra has the right to designate three directors on the seven member board of directors of the Enlivant Joint Venture and has other ~~customary minority rights.~~

~~Preferred Stock Redemption~~offering expenses.

On June ~~1, 2018 (the “Redemption Date”),~~29, 2019, we redeemed all ~~5,750,000~~$500.0 million aggregate principal amount outstanding ~~shares~~ of ~~our Series A Preferred Stock. The shares of Series A Preferred Stock were redeemed~~the 5.5% senior unsecured notes due 2021 at a ~~redemption price~~premium of ~~$25.00 per share,~~101.375%, plus accrued and unpaid ~~dividends~~interest. The redemption resulted in $10.1 million of redemption related costs and write-offs, including $6.9 million in payments made to ~~but not including, the Redemption Date, without interest, in the amount~~noteholders and legal fees for early redemption and $3.2 million of ~~$0.4453125 per share of Series A Preferred Stock, for a total redemption price per share of Series A Preferred Stock equal to $25.4453125.~~write-offs associated with unamortized deferred financing and premium costs.

Critical Accounting Policies

Our condensed consolidated interim financial statements have been prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. A discussion of the accounting policies that management considers critical in that they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results is included in Part II, Item 7 of our ~~2017~~2018 Annual Report on Form 10-K filed with the SEC. ~~There~~Except for the impact of Topic 842, as discussed in Note 2, “Summary of Significant Accounting Policies,” in the Notes to Condensed Consolidated Financial Statements, there have been no significant changes to our critical accounting policies during the six months ended June 30, ~~2018.~~2019.

Recently Issued Accounting Standards Update

See Note 2, “Summary of Significant Accounting Policies,” in the Notes to Condensed Consolidated Financial Statements for information concerning recently issued accounting standards updates.

Results of Operations

As of June 30, 2019, our investment portfolio included 432 real estate properties held for investment, one investment in a direct financing lease, 20 investments in loans receivable, nine preferred equity investments and one investment in an unconsolidated joint venture. As of June 30, 2018, our investment portfolio included 487 real estate properties held for investment, one asset held for sale, one investment in a direct financing lease, 22 investments in loans receivable, 13 preferred equity investments and one investment in an unconsolidated joint venture. ~~As of June 30, 2017, our investment portfolio included 183 real estate properties held for investment, eight investments in loans receivable and 12 preferred equity investments.~~ In general, we expect that ~~our~~ income and expenses related to our portfolio will ~~increase~~fluctuate in future periods in comparison to the corresponding prior periods as a result of ~~owning acquired investments for an entire period, the~~investment and disposition activity and anticipated future ~~acquisition of additional investments and~~

~~completion of the CCP Merger.~~changes in our portfolio. The results of operations presented are not directly comparable due to ongoing acquisition and disposition activity.

Comparison of results of operations for the three months ended June 30, ~~2018~~2019 versus the three months ended June 30, ~~2017~~2018 (dollars in thousands):


	Three Months Ended June 30,						Increase / (Decrease)				Percentage Difference			Variance due to the CCP Merger, Acquisitions, Originations and Dispositions ⁽¹⁾			Remaining Variance ⁽²⁾		Three Months Ended June 30,							Increase / (Decrease)			Percentage Difference		Variance due to Acquisitions, Originations and Dispositions ⁽¹⁾			Remaining Variance ⁽²⁾
	2018			2017						2019						2018
Revenues:
Rental income	$	144,229		$	55,904		$	88,325					158	%	$	93,752				$	(5,427	)
Rental and related revenues																			$	112,800			$	144,229		$	(31,429	)	(22	)%	$	(18,323	)	$	(13,106	)
Interest and other income	4,553			2,027			2,526				125	%		2,686			(160	)	70,495				4,553			65,942			1,448	%	(1,268		)	67,210
Resident fees and services	17,530			6,805			10,725				158	%		10,089			636		36,071				17,530			18,541			106	%	(466		)	19,007
Expenses:
Depreciation and amortization	46,828			17,220			29,608				172	%		29,636			(28	)	49,476				46,828			2,648			6	%	(4,359		)	7,007
Interest	36,757			15,862			20,895				132	%		16,948			3,947		33,608				36,757			(3,149		)	(9	)%	—			(3,149		)
Operating expenses	12,299			4,407			7,892				179	%		7,458			434
Triple-net portfolio operating expenses																			6,240				—			6,240			NM		—			6,240
Senior housing - managed portfolio operating expenses																			24,239				12,299			11,940			97	%	(351		)	12,291
General and administrative	9,271			5,126			4,145				81	%		302			3,843		8,059				9,383			(1,324		)	(14	)%	(276		)	(1,048		)
Merger and acquisition costs	112			5,887			(5,775		)		(98	)%		(5,775	)		—
(Recovery of) provision for doubtful accounts and loan losses	(674		)	535			(1,209		)		(226	)%		—			(1,209	)
Provision for (recovery of) doubtful accounts, straight-line rental income and loan losses																			193				(674		)	867			(129	)%	—			867
Impairment of real estate	881			—			881				NM			—			881		2,002				881			1,121			127	%	—			1,121
Other income:
Other income	—			941			(941		)		(100	)%		—			(941	)
Other (expense) income:
Loss on extinguishment of debt																			(10,119		)		—			(10,119		)	NM		—			(10,119		)
Net gain on sales of real estate	142,903			4,032			138,871				3,444	%		138,871			—		2,755				142,903			(140,148		)	(98	)%	(140,148		)	—
Loss from unconsolidated joint venture	(2,347		)	—			(2,347		)		NM			(2,347	)		—		(3,647		)		(2,347		)	(1,300		)	55	%	(1,690		)	390
Income tax expense	(605		)	(136		)	(469		)		345	%		—			(469	)	(854		)		(605		)	(249		)	41	%	—			(249		)


⁽¹⁾	Represents the dollar amount increase (decrease) for the three months ended June 30, ~~2018~~2019 compared to the three months ended June 30, ~~2017~~2018 as a result of ~~the CCP Merger and~~ investments/dispositions made after April 1, ~~2017~~2018.


⁽²⁾	Represents the dollar amount increase (decrease) for the three months ended June 30, ~~2018~~2019 compared to the three months ended June 30, ~~2017~~2018 that is not a direct result of ~~the CCP Merger and~~ investments/dispositions made after April 1, ~~2017~~. 2018.

Rental ~~Income~~and Related Revenues

During the three months ended June 30, ~~2018,~~2019, we recognized ~~$144.2~~$112.8 million of rental income compared to ~~$55.9~~$144.2 million for the three months ended June 30, ~~2017.~~2018. The ~~$88.3~~$31.4 million ~~increase~~net decrease in rental income is primarily ~~due~~related to ~~an increase of $86.4~~(i) a $19.5 million ~~from properties acquired in the CCP Merger and an increase of $11.2 million from other properties acquired after April 1, 2017, partially offset by a~~ decrease ~~of $3.9 million~~ from properties disposed of after April 1, ~~2017,~~2018, (ii) a ~~$4.8~~$9.8 million decrease ~~due~~from the 21 Holiday Communities that were transitioned to Senior Housing - Managed communities in April 2019, (iii) a $5.2 million net decrease primarily related to lease restructurings and leases that we concluded should no longer be accounted for on an accrual basis as a result of adopting Accounting Standards Update (“ASU”) 2016-02, Leases, as amended by subsequent ASUs (“Topic 842”), consisting of a $3.1 million net decrease in earned cash rents and a $2.8 million net decrease in straight-line rental income, partially offset by a $0.7 million net increase in above/below market lease intangible amortization, and (iv) a $3.3 million decrease related to the ~~Genesis lease restructuring agreement~~10 remaining Senior Care Centers facilities, eight of which ~~reduced the annual base rent payable under the Genesis leases by $19.0 million and a $1.5 million decrease due to five skilled nursing/transitional care facilities~~were transitioned to a new operator. These amounts were partially offset by a $4.8 million increase related to property tax recoveries due to the adoption of Topic 842, which now requires lessor costs that are paid by the lessor and reimbursed by the lessee to be included in the measurement of variable lease revenue and the associated expense, and an increase of $1.1 million from properties acquired after April 1, 2018. Our reported rental and related revenues may be subject to increased variability in the future as a result of adopting Topic 842. However, there can be no assurances regarding the timing and amount of these collections. Amounts due under the terms of all of our lease agreements are subject to contractual increases, and contingent rental income may be derived from certain lease agreements. No material contingent rental income was derived during the three months ended June 30, ~~2018~~2019 and ~~2017.~~2018.

Interest and Other Income

Interest and other income primarily consists of income earned on our loans receivable investments, preferred returns earned on our preferred equity investments and income on the direct financing lease. During the three months ended June 30, ~~2018,~~2019, we recognized ~~$4.6~~$70.5 million of interest and other income compared to ~~$2.0~~$4.6 million for the three months ended June 30, ~~2017.~~

2018. The net increase of ~~$2.5~~$65.9 million is primarily due to (i) $66.9 million of income related to the transition of the Holiday Communities to our Senior Housing- Managed portfolio, consisting of a $57.2 million lease termination payment and a $9.7 million gain related to the assumption of fixed assets net of liabilities and (ii) an increase of ~~$2.5~~$0.5 million ~~primarily~~ related to interest income from loans receivable investments ~~and income from a direct financing lease,~~made after April 1, 2018, partially offset by a ~~$0.7~~decrease of $1.8 million ~~decrease~~ from investments that were ~~disposed~~repaid after April 1, ~~2017. Included in interest~~2018. The remaining increase is due to income ~~is $0.9 million from a legacy CCP loan~~on additional fundings for loans receivable ~~that was fully repaid in June 2018, which represents the difference between the outstanding principal balance repaid and its discounted book value.~~investments made before April 1, 2018.

Resident Fees and Services

During the three months ended June 30, ~~2018,~~2019, we recognized ~~$17.5~~$36.1 million of resident fees and services compared to ~~$6.8~~$17.5 million for the three months ended June 30, ~~2017.~~2018. The ~~$10.7~~$18.5 million net increase is primarily ~~due~~related to ~~a $10.1~~an $18.9 million increase ~~related to 13 properties acquired after April 1, 2017 and a $0.2 million increase due to one senior housing community~~from the 21 Holiday Communities that ~~was~~were transitioned to Senior Housing - Managed communities in ~~May 2017.~~April 2019, partially offset by a $0.5 million decrease from one Senior Housing - Managed community disposed of after April 1, 2018.

Depreciation and Amortization

During the three months ended June 30, ~~2018,~~2019, we incurred ~~$46.8~~$49.5 million of depreciation and amortization expense compared to ~~$17.2~~$46.8 million for the three months ended June 30, ~~2017.~~2018. The ~~$29.6~~$2.6 million net increase in depreciation and amortization expense is primarily related to (i) a $5.7 million increase due to ~~an increase~~the acceleration of ~~$26.4 million~~lease intangible amortization related to the ~~properties acquired~~transition of the 21 Holiday Communities to Senior Housing - Managed communities in April 2019, (ii) a $0.9 million increase due to the ~~CCP Merger~~acceleration of lease intangible amortization in connection with the transition of six skilled nursing/transitional care facilities to new operators and an(iii) a $0.5 million increase ~~of $4.6 million~~ from ~~other~~ properties acquired after April 1, ~~2017,~~2018, partially offset by a $4.9 million decrease ~~of $1.4 million~~ from properties disposed of after April 1, ~~2017.~~2018.

Interest Expense

We incur interest expense comprised of costs of borrowings plus the amortization of deferred financing costs related to our indebtedness. During the three months ended June 30, ~~2018,~~2019, we incurred ~~$36.8~~$33.6 million of interest expense compared to ~~$15.9~~$36.8 million for the three months ended June 30, ~~2017.~~2018. The ~~$20.9~~$3.1 million net ~~increase~~decrease is primarily related to (i) a ~~$7.4~~$3.4 million increase in interest expense related to two senior notes assumed in the CCP Merger (see Note 7, “Debt” in the Notes to Condensed Consolidated Financial Statements for additional information), (ii) a $6.4 million increase in interest expense related to our U.S. dollar term loans as a result of increasing U.S. dollar term loan borrowings from $245.0 million to $1.1 billion in connection with the CCP Merger, (iii) a $5.6 million increasedecrease in interest expense related to the borrowings outstanding on the Revolving Credit Facility ~~(iv)~~(as defined below) and (ii) a ~~$0.9~~$1.4 million ~~increase primarily related to the $98.5 million secured term loan assumed~~decrease in ~~the CCP Merger and (v) a $0.6 million increase of non-cash~~ interest expense related to our secured borrowings primarily due to the repayment of five mortgage notes during 2018, which were partially offset by (i) a $1.4 million increase in interest ~~rate hedges.~~expense related to the issuance of the 2024 Notes (as defined below), including $1.0 million of incremental interest expense related to the redemption of the 2021 Notes (as defined below) occurring after the issuance of the 2024 Notes, and (ii) a $0.3 million increase in interest expense related to our U.S. dollar term loans primarily due to an increase in interest rates.

Triple-Net Portfolio Operating Expenses

During the three months ended June 30, ~~2018,~~2019, we recognized ~~$12.3~~$6.2 million of triple-net portfolio operating expenses, of which $4.8 million is due to the adoption of Topic 842, which now requires lessor costs that are paid by the lessor and reimbursed by the lessee to be included in the measurement of variable lease revenue and the associated expense and the remaining $1.4 million is primarily due to property taxes that are not expected to be reimbursed by our tenants.

Senior Housing - Managed Portfolio Operating Expenses

During the three months ended June 30, 2019, we recognized $24.2 million of Senior Housing - Managed portfolio operating expenses compared to ~~$4.4~~$12.3 million for the three months ended June 30, ~~2017.~~2018. The ~~$7.9~~$11.9 million net increase is primarily ~~due~~related to ~~a $7.5~~an $11.9 million increase ~~related to 13 properties acquired after April 1, 2017 and a $0.1 million increase due to one senior housing community~~from the 21 Holiday Communities that ~~was~~were transitioned to Senior Housing - Managed communities in ~~May 2017.~~April 2019, partially offset by a $0.3 million decrease from one Senior Housing - Managed community disposed of after April 1, 2018.

General and Administrative Expenses

General and administrative expenses include compensation-related expenses as well as professional services, office costs, ~~and~~ other costs associated with asset ~~management.~~management, and merger and acquisition costs. During the three months ended June 30, ~~2018~~2019, general and administrative expenses were $~~9.3~~8.1 million compared to $~~5.1~~9.4 million during the three months ended June 30, ~~2017~~2018. The ~~$4.1~~$1.3 million ~~increase~~net decrease is primarily related to (i) a ~~$1.0~~$1.1 million ~~increase~~decrease in ~~stock-based compensation expense, (ii) a $0.7 million increase in payroll~~legal expenses ~~related~~primarily due to expenses incurred during the ~~increased number of employees, (iii) $0.6 million of expenses~~three months ended June 30, 2018 related to the previously anticipated refinancing of ~~the~~certain Senior Notes (as defined below)~~, (iv) a $0.5 million increase in legal, professional~~ and ~~insurance fees primarily due to the management of the increased number of investments, (v) $0.3 million in legal fees related to~~ the recovery of previously reserved cash rental income and ~~(vi)~~(ii) a $0.3 million ofdecrease in transition expenses ~~for~~related to the CCP ~~Merger primarily consisting of salaries, severance benefits~~Merger. We expect expensed merger and ~~office expenses. The increase in stock-based compensation expense,~~acquisition costs to fluctuate from ~~$1.7 million during the three months ended June 30, 2017~~period to ~~$2.7 million during the three months ended June 30, 2018, is primarily due to the increased number of employees~~period depending on acquisition activity and the change in our stock price during the three months ended June 30, 2018 (an increase of $4.08 per share) compared to the three months ended June 30, 2017 (a decrease of $3.83 per share). We issue stock to employees who elected to receive annual bonuses in stock rather than in cashwhether these acquisitions are considered business combinations.

Provision for (Recovery of) Doubtful Accounts, Straight-Line Rental Income and ~~therefore changes in our stock price will result in changes to our bonus expense.~~

~~Merger and Acquisition Costs~~Loan Losses

During the three months ended June 30, ~~2018,~~2019, we ~~incurred $0.1~~recognized a $0.2 million provision for doubtful accounts, straight-line rental income and loan losses, all of ~~merger and acquisition costs compared to $5.9 million for the three months ended June 30, 2017. The costs incurred in both periods were primarily related to the CCP Merger.~~

~~(Recovery of) Provision for Doubtful Accounts and Loan Losses~~

which was associated with loan loss reserves. During the three months ended June 30, 2018, we recognized a $0.7 million net recovery of doubtful accounts, straight-line rental income and loan losses, which iswas comprised of a $1.0 million recovery of previously reserved cash rental income, partially offset by a $0.1 ~~million increase in reserves on straight-line rental income and a $0.2 million increase in loan loss reserves. During the three months~~

~~ended June 30, 2017, we recognized a $0.5 million provision for doubtful accounts and loan losses, which is primarily comprised of a $0.3~~ million increase in reserves on straight-line rental income and a $0.2 million increase in loan loss reserves.

Impairment of Real Estate

During the three months ended June 30, 2019, we recognized $2.0 million of impairment of real estate related to four skilled nursing/transitional care facilities. During the three months ended June 30, 2018, we recognized $0.9 million of impairment of real estate related to one skilled nursing/~~transitional~~transition care facility. ~~No impairment~~

Loss on Extinguishment of ~~real estate was recognized during~~Debt

During the three months ended June 30, ~~2017.~~

~~Other Income~~

2019, we recognized a $10.1 million loss on extinguishment of debt in connection with the redemption of the 2021 Notes, including $6.9 million in payments made to noteholders and legal fees for early redemption and $3.2 million of write-offs associated with unamortized deferred financing and premium costs. During the three months ended June 30, 2018, we did not recognize any ~~other income. During the three months ended June 30, 2017, we recognized $0.9 million~~loss on extinguishment of ~~other income, which was primarily due to the amortization of lease termination payments related to a memorandum of understanding with Genesis.~~debt.

Net Gain on Sales of Real Estate

During the three months ended June 30, 2019, we recognized an aggregate net gain on the sales of real estate of $2.8 million related to the disposition of 28 skilled nursing/transitional care facilities and seven senior housing communities. During the three months ended June 30, 2018, we recognized an aggregate net gain on the sales of real estate of $142.9 million ~~primarily~~ related to the disposition of 32 skilled nursing/transitional care facilities and four senior housing communities. During the three months ended June 30, 2017, we recognized a net gain on the sale of real estate of $4.0 million related to the disposition of one skilled nursing/transitional care facility. See Note 5, “Asset Held for Sale and Dispositions” in the Notes to Condensed Consolidated Financial Statements for additional information.

Loss from Unconsolidated Joint Venture

During the three months ended June 30, ~~2018,~~2019, we recognized ~~$2.3~~$3.6 million of loss from the Enlivant Joint ~~Venture. Included~~Venture compared to $2.3 million for the three months ended June 30, 2018. The $1.3 million net increase is primarily related to (i) a $1.7 million net loss on the sale of two senior housing communities and (ii) a $0.5 million increase in ~~the loss is~~interest expense primarily due to an increase in interest rates, partially offset by a $0.6 million increase in revenues net of ~~deferred tax expense.~~operating expenses primarily due to increased occupancy and rates.

Income Tax Expense

During the three months ended June 30, ~~2018,~~2019, we recognized ~~$0.6~~$0.9 million of income tax expense compared to ~~$0.1~~$0.6 million for the three months ended June 30, ~~2017.~~2018. The increase is primarily due to the increase in Senior Housing - Managed ~~communities and higher state taxes as a result of the increased number of investments.~~communities.

Comparison of results of operations for the six months ended June 30, ~~2018~~2019 versus the six months ended June 30, ~~2017~~2018 (dollars in thousands):


	Six Months Ended June 30,						Increase / (Decrease)				Percentage Difference			Variance due to the CCP Merger, Acquisitions, Originations and Dispositions ⁽¹⁾			Remaining Variance ⁽²⁾		Six Months Ended June 30,							Increase / (Decrease)			Percentage Difference		Variance due to Acquisitions, Originations and Dispositions ⁽¹⁾			Remaining Variance ⁽²⁾
	2018			2017						2019						2018
Revenues:
Rental income	$	288,484		$	113,128		$	175,356					155	%	$	188,081				$	(12,725	)
Rental and related revenues																			$	229,187			$	288,484		$	(59,297	)	(21	)%	$	(32,748	)	$	(26,549	)
Interest and other income	8,891			3,972			4,919				124	%		5,399			(480	)	73,820				8,891			64,929			730	%	(2,517		)	67,446
Resident fees and services	35,023			10,286			24,737				240	%		19,916			4,821		53,132				35,023			18,109			52	%	(931		)	19,040
Expenses:
Depreciation and amortization	94,833			36,357			58,476				161	%		59,215			(739	)	94,425				94,833			(408		)	—	%	(6,400		)	5,992
Interest	72,575			31,650			40,925				129	%		33,380			7,545		69,926				72,575			(2,649		)	(4	)%	—			(2,649		)
Operating expenses	24,423			6,827			17,596				258	%		14,803			2,793
Triple-net portfolio operating expenses																			11,529				—			11,529			NM		—			11,529
Senior housing - managed portfolio operating expenses																			36,279				24,423			11,856			49	%	(712		)	12,568
General and administrative	17,138			11,215			5,923				53	%		1,703			4,220		16,243				17,580			(1,337		)	(8	)%	(1,575		)	238
Merger and acquisition costs	442			6,451			(6,009		)		(93	)%		(6,009	)		—
Provision for doubtful accounts and loan losses	539			2,305			(1,766		)		(77	)%		—			(1,766	)
Provision for doubtful accounts, straight-line rental income and loan losses																			1,400				539			861			160	%	—			861
Impairment of real estate	1,413			—			1,413				NM			532			881		105,136				1,413			103,723			7,341	%	68,558			35,165
Other income:
Other income	2,820			3,070			(250		)		(8	)%		—			(250	)
Other (expense) income:
Loss on extinguishment of debt																			(10,119		)		—			(10,119		)	NM		—			(10,119		)
Other (expense) income																			170				2,820			(2,650		)	(94	)%	—			(2,650		)
Net gain on sales of real estate	142,431			4,032			138,399				3,433	%		138,399			—		1,235				142,431			(141,196		)	(99	)%	(141,196		)	—
Loss from unconsolidated joint venture	(1,901		)	—			(1,901		)		NM			(1,901	)		—		(5,030		)		(1,901		)	(3,129		)	165	%	(1,690		)	(1,439		)
Income tax expense	(1,115		)	(356		)	(759		)		213	%		—			(759	)	(1,466		)		(1,115		)	(351		)	31	%	—			(351		)


⁽¹⁾	Represents the dollar amount increase (decrease) for the six months ended June 30, ~~2018~~2019 compared to the six months ended June 30, ~~2017~~2018 as a result of ~~the CCP Merger and~~ investments/dispositions made after January 1, ~~2017.~~2018.


⁽²⁾	Represents the dollar amount increase (decrease) for the six months ended June 30, ~~2018~~2019 compared to the six months ended June 30, ~~2017~~2018 that is not a direct result of ~~the CCP Merger and~~ investments/dispositions made after January 1, ~~2017.~~2018.

Rental ~~Income~~and Related Revenues

During the six months ended June 30, ~~2018,~~2019, we recognized ~~$288.5~~$229.2 million of rental income compared to ~~$113.1~~$288.5 million for the six months ended June 30, ~~2017.~~2018. The ~~$175.4~~$59.3 million ~~increase~~net decrease in rental income is primarily due to ~~an increase of $172.4~~(i) a $36.0 million ~~from properties acquired in the CCP Merger and an increase of $21.8 million from other properties acquired after January 1, 2017, partially offset by a~~ decrease ~~of $6.1 million~~ from properties disposed of after January 1, ~~2017,~~2018, (ii) a ~~$9.5~~$18.5 million decrease primarily related to lease restructurings and leases that we concluded should no longer be accounted for on an accrual basis as a result of adopting Topic 842, consisting of a $9.0 million net decrease in earned cash rents, a $5.1 million net decrease in straight-line rental income and a $4.4 million net decrease primarily due to the ~~Genesis~~acceleration of above/below market lease ~~restructuring agreement which reduced the annual base rent payable under the Genesis leases by $19.0 million,~~intangible amortization, (iii) a ~~$2.8~~$10.9 million decrease ~~due to five skilled nursing/transitional care facilities transitioned to a new operator and a $1.4 million decrease due to~~from the ~~nine senior housing communities~~21 Holiday Communities that were transitioned to Senior Housing - Managed communities in ~~March~~April 2019 and ~~May 2017.~~(iv) a $6.5 million decrease related to the 10 remaining Senior Care Centers facilities, eight of which were transitioned to a new operator. These amounts were partially offset by a $9.0 million increase related to property tax recoveries due to the adoption of Topic 842, which now requires lessor costs that are paid by the lessor and reimbursed by the lessee to be included in the measurement of variable lease revenue and the associated expense, and an increase of $3.3 million from properties acquired after April 1, 2018. Our reported rental and related revenues may be subject to increased variability in the future as a result of adopting Topic 842. However, there can be no assurances regarding the timing and amount of these collections. Amounts due under the terms of all of our lease agreements are subject to contractual increases, and contingent rental income may be derived from certain lease agreements. No material contingent rental income was derived during the six months ended June 30, ~~2018~~2019 and ~~2017.~~2018.

Interest and Other Income

2019, we recognized ~~$8.9~~$73.8 million of interest and other income compared to ~~$4.0~~$8.9 million for the six months ended June 30, ~~2017.~~2018. The net increase of ~~$4.9~~$64.9 million is primarily due to (i) $66.9 million of income related to the transition of the Holiday Communities to our Senior Housing- Managed portfolio, consisting of a $57.2 million lease termination payment and a $9.7 million gain related to the assumption of fixed assets net of liabilities and (ii) an increase of ~~$5.5~~$1.0 million ~~primarily~~ related to interest income from loans receivable investments ~~income from a direct financing lease and income from the specialty valuation firm acquired in the CCP Merger that we subsequently sold in March~~made after January 1, 2018, partially offset by a ~~$1.0~~decrease of $3.5 million ~~decrease~~ from investments that were ~~disposed~~repaid after January 1, ~~2017. Included in interest~~2018. The remaining increase is due to income ~~is $0.9 million from a legacy CCP loan~~on additional fundings for loans receivable ~~that was fully repaid in June 2018, which represents the difference between the outstanding principal balance repaid and its discounted book value.~~investments made before January 1, 2018.

Resident Fees and Services

During the six months ended June 30, ~~2018,~~2019, we recognized ~~$35.0~~$53.1 million of resident fees and services compared to ~~$10.3~~$35.0 million for the six months ended June 30, ~~2017.~~2018. The ~~$24.7~~$18.1 million net increase is primarily due to ~~a $19.9~~an $18.9 million increase ~~related to 13 properties acquired after January 1, 2017 and a $4.5 million increase due to nine senior housing communities~~from the 21 Holiday Communities that were transitioned to Senior Housing - Managed communities in ~~March and May 2017.~~April 2019, partially offset by a $0.9 million decrease from one Senior Housing - Managed community disposed of after January 1, 2018.

Depreciation and Amortization

During the six months ended June 30, ~~2018,~~2019, we incurred ~~$94.8~~$94.4 million of depreciation and amortization expense compared to ~~$36.4~~$94.8 million for the six months ended June 30, ~~2017.~~2018. The ~~$58.5~~$0.4 million net ~~increase~~decrease in depreciation and amortization expense is primarily due ~~to an increase of $53.1 million related to the properties acquired in the CCP Merger and an increase of $8.5 million from other properties acquired after January 1, 2017, partially offset by~~ a decrease of ~~$2.4~~$7.7 million from properties disposed of after January 1, ~~2017; the remaining $0.7~~2018, partially offset by (i) a $5.7 million ~~decrease is primarily~~increase due to the acceleration of lease intangible amortization related to the ~~nine senior housing communities transitioned~~transition of the 21 Holiday Communities to Senior Housing - Managed communities in ~~March~~April 2019, (ii) an increase of $1.3 million from other properties acquired after January 1, 2018 and ~~May 2017.~~(iii) a $0.9 million increase due to the acceleration of lease intangible amortization in connection with the transition of six skilled nursing/transitional care facilities to new operators.

Interest Expense

We incur interest expense comprised of costs of borrowings plus the amortization of deferred financing costs related to our indebtedness. During the six months ended June 30, ~~2018,~~2019, we incurred ~~$72.6~~$69.9 million of interest expense compared to ~~$31.7~~$72.6 million for the six months ended June 30, ~~2017.~~2018. The ~~$40.9~~$2.6 million net ~~increase~~decrease is primarily related to (i) a ~~$14.7~~$2.7 million increase in interest expense related to two senior notes assumed in the CCP Merger (see Note 7, “Debt” in the Notes to Condensed Consolidated Financial Statements for additional information), (ii) a $12.5 million increasedecrease in interest expense related to our ~~U.S. dollar term loans as~~secured borrowings primarily due to the repayment of five mortgage notes during 2018 and (ii) a ~~result of increasing U.S. dollar term loan borrowings from $245.0~~$2.2 million ~~to $1.1 billion in connection with the CCP Merger, (iii) a $10.7 million increase~~decrease in interest expense related to the borrowings outstanding on the Revolving Credit Facility, ~~(iv)~~which were partially offset by (i) a ~~$1.7~~$1.4 million increase ~~primarily~~in interest expense related to the ~~$98.5~~issuance of the 2024 Notes, including $1.0 million ~~secured term loan assumed in~~of incremental interest expense related to the ~~CCP Merger~~redemption of the 2021 Notes occurring after the issuance of the 2024 Notes, and ~~(v)~~(ii) a ~~$1.3~~$0.9 million increase ~~of non-cash~~in interest expense related to our U.S. dollar term loans primarily due to an increase in interest ~~rate hedges.~~rates.

Triple-Net Portfolio Operating Expenses

During the six months ended June 30, ~~2018,~~2019, we recognized ~~$24.4~~$11.5 million of triple-net portfolio operating expenses, of which $9.0 million is due to the adoption of Topic 842, which now requires lessor costs that are paid by the lessor and reimbursed by the lessee to be included in the measurement of variable lease revenue and the associated expense, and the remaining $2.5 million is primarily due to property taxes that are not expected to be reimbursed by our tenants.

Senior Housing - Managed Portfolio Operating Expenses

During the six months ended June 30, 2019, we recognized $36.3 million of operating expenses compared to ~~$6.8~~$24.4 million for the six months ended June 30, ~~2017.~~2018. The ~~$17.6~~$11.9 million increase is primarily due to ~~a $14.8~~an $11.9 million increase ~~related to 13 properties acquired after January 1, 2017 and a $2.6 million increase due to nine senior housing communities~~from the 21 Holiday Communities that were transitioned to Senior Housing - Managed communities in ~~March and May 2017.~~April 2019, partially offset by a $0.7 million decrease from one Senior Housing - Managed community disposed of after January 1, 2018.

General and Administrative Expenses

General and administrative expenses include compensation-related expenses as well as professional services, office costs, ~~and~~ other costs associated with asset ~~management.~~management, and merger and acquisition costs. During the six months ended June 30, ~~2018,~~2019, general and administrative expenses were ~~$17.1~~$16.2 million compared to ~~$11.2~~$17.6 million during the six months ended June 30, ~~2017.~~2018. The ~~$5.9~~$1.3 million ~~increase~~net decrease is primarily related to (i) a ~~$1.4~~$1.7 million ~~increase~~decrease in ~~payroll~~legal expenses primarily due to expenses incurred during the six months ended June 30, 2018 related to the previously anticipated refinancing of certain Senior Notes, the recovery of previously reserved cash rental income and the repositioning of the CCP portfolio, (ii) a $0.8 million decrease in transition expenses related to the increased number of employees, (ii) a $1.0 million increase in legal, professional and insurance fees primarily due to the management of the increased number of investments, (iii) $1.0 million of transition expenses for the CCP Merger ~~primarily consisting of salaries, severance benefits~~ and ~~office expenses, (iv)~~(iii) a $0.8 million decrease in expenses incurred by our specialty valuation firm that we sold in March 2018, (v) $0.6 million in legal fees related to the recovery of previously reserved cash rental income and (vi) $0.6 million of expenses related to the previously anticipated refinancing of the Senior Notes. The increases are partially offset by a ~~$0.5~~$1.8 million ~~decrease~~increase in stock-based ~~compensation.~~compensation expense. The ~~decrease~~increase in stock-based compensation expense, from ~~$4.3 million during the six months ended June 30, 2017 to~~ $3.8 million during the six months ended June 30, 2018 to $5.6 million during the

six months ended June 30, 2019, is primarily due to a change in performance-based vesting assumptions on management’s equity compensation.

~~Merger~~Provision for Doubtful Accounts, Straight-Line Rental Income and ~~Acquisition Costs~~Loan Losses

During the six months ended June 30, ~~2018,~~2019, we ~~incurred $0.4~~recognized a $1.4 million provision for doubtful accounts, straight-line rental income and loan losses, all of ~~merger and acquisition costs compared to $6.5 million for the six months ended June 30, 2017. The costs incurred in both periods were primarily related to the CCP Merger.~~

~~Provision for Doubtful Accounts and Loan Losses~~

which was associated with loan loss reserves. During the six months ended June 30, 2018, we recognized a $0.5 million provision for doubtful accounts, straight-line rental income and loan losses, which is comprised of a $2.2 million increase in reserves on straight-line rental income and a $0.3 million increase in loan loss reserves, partially offset by a $2.0 million recovery of previously reserved cash rental income.

Impairment of Real Estate

During the six months ended June 30, ~~2017,~~2019, we recognized ~~a $2.3~~$105.1 million ~~provision for doubtful accounts~~of impairment of real estate, consisting of (i) $92.2 million related to the Senior Care Centers portfolio, including the 28 facilities sold on April 1, 2019, and ~~loan losses,~~ which ~~is primarily~~

~~comprised of a $1.9~~includes $10.2 million ~~increase in loan loss reserves, a $0.3~~related to our estimated contractual indemnification obligations, and (ii) $12.9 million ~~increase in reserves on straight-line rental income and a $0.1 million increase in reserves on cash rental income.~~

~~Impairment of Real Estate~~

related to four additional skilled nursing/transitional care facilities. During the six months ended June 30, 2018, we recognized $1.4 million of impairment of real estate related to one senior housing community and one skilled nursing/transitional care facility. The senior housing community was sold during the six months ended June 30, 2018. ~~See Note 5, “Asset Held for Sale and Dispositions” in the Notes to Condensed Consolidated Financial Statements for additional information. No impairment~~

Loss on Extinguishment of ~~real estate was recognized during~~Debt

During the six months ended June 30, ~~2017.~~2019, we recognized a $10.1 million loss on extinguishment of debt in connection with the redemption of the 2021 Notes, including $6.9 million in payments made to noteholders and legal fees for early redemption and $3.2 million of write-offs associated with unamortized deferred financing and premium costs. During the six months ended June 30, 2018, we did not recognize any loss on extinguishment of debt.

Other Income

During the six months ended June 30, 2019, we recognized $0.2 million of other income due to a settlement payment received related to a legacy CCP investment. During the six months ended June 30, 2018, we recognized $2.8 million of other ~~income. The $2.8 million~~income, which is primarily comprised of ~~other income is comprised of~~(i) a $2.0 million contingency fee ~~earned in the current period~~ related to a legacy CCP investment, (ii) $0.6 million related to cash payments received from two facilities not subject to a lease and (iii) $0.2 million related to the sale of our specialty valuation firm. During the six months ended June 30, 2017, we recognized $3.1 million of other income, of which $2.3 million was due to the amortization of lease termination payments related to a memorandum of understanding with Genesis and $0.8 million related to other income as a result of adjusting the fair value of our contingent consideration liability related to the acquisition of a real estate property, partially offset by $0.1 million of ineffectiveness loss related to our LIBOR interest rate swaps.

Net Gain on Sales of Real Estate

During the six months ended June 30, ~~2018,~~2019, we recognized an aggregate net gain on the sales of real estate of $1.2 million related to the disposition of 31 skilled nursing/transitional care facilities and seven senior housing communities. During the six months ended June 30, 2018, we recognized a net gain on the sale of real estate of $142.4 million ~~primarily~~ related to the disposition of 33 skilled nursing/transitional care facilities and four senior housing communities. During the six months ended June 30, 2017, we recognized a net gain on the sale of real estate of $4.0 million related to the disposition of one skilled nursing/transitional care facility. See Note 5, “Asset Held for Sale and Dispositions” in the Notes to Condensed Consolidated Financial Statements for additional information.communities

Loss from Unconsolidated Joint Venture

During the six months ended June 30, ~~2018,~~2019, we recognized ~~$1.9~~$5.0 million of loss from the Enlivant Joint ~~Venture. Included~~Venture compared to $1.9 million for the six months ended June 30, 2018. The $3.1 million net increase is primarily related to (i) a $1.7 million net loss on the sale of two senior housing communities, (ii) a $1.9 million increase in ~~the loss is~~interest expense primarily due to an increase in interest rates and (iii) a $0.3 million increase in income tax expense, partially offset by a $1.1 million increase in revenues net of ~~deferred tax expense.~~operating expenses primarily due to increased occupancy and rates.

Income Tax Expense

During the six months ended June 30, ~~2018,~~2019, we recognized ~~$1.1~~$1.5 million of income tax expense compared to ~~$0.4~~$1.1 million for the six months ended June 30, ~~2017.~~2018. The increase is primarily due to the increase in Senior Housing - Managed ~~communities and higher state taxes as a result of the increased number of investments.~~communities.

Funds from Operations and Adjusted Funds from Operations

We believe that net income attributable to common stockholders as defined by GAAP is the most appropriate earnings measure. We also believe that funds from operations attributable to common stockholders (“FFO”), as defined in accordance with the definition used by the National Association of Real Estate Investment Trusts (“NAREIT”), and adjusted funds from operations attributable to common stockholders (“AFFO”) (and related per share amounts) are important non-GAAP

supplemental measures of our operating performance. Because the historical cost accounting convention used for real estate assets requires straight-line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time. However, since real estate values have historically risen or fallen with market and other conditions, presentations of operating results for a REIT that uses historical cost accounting for depreciation could be less informative. Thus, NAREIT created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation and amortization, among other items, from net income attributable to common stockholders, as defined by GAAP. FFO is defined as net income attributable to common stockholders, computed in accordance with GAAP, excluding gains or losses from real estate dispositions and our share of gains or losses from real estate dispositions related to our unconsolidated joint venture, plus real estate depreciation and amortization, net of amounts related to noncontrolling interests, plus our share of depreciation and amortization related to our unconsolidated joint venture, and real estate impairment charges. AFFO is defined as FFO excluding merger and acquisition costs, stock-based compensation expense, straight-line rental income adjustments, amortization of above and below market lease intangibles, non-cash interest income adjustments, non-cash interest expense, change in fair value of contingent consideration, non-cash portion of loss on extinguishment of debt, provision for doubtful straight-line rental income, loan losses and other reserves and deferred income taxes, as well as other non-cash revenue and expense items (including ineffectiveness gain/loss on derivative instruments, and non-cash revenue and expense amounts related to noncontrolling interests) and our share of non-cash adjustments related to our

unconsolidated joint venture. We believe that the use of FFO and AFFO (and the related per share amounts), combined with the required GAAP presentations, improves the understanding of our operating results among investors and makes comparisons of operating results among REITs more meaningful. We consider FFO and AFFO to be useful measures for reviewing comparative operating and financial performance because, by excluding the applicable items listed above, FFO and AFFO can help investors compare our operating performance between periods or as compared to other companies. While FFO and AFFO are relevant and widely used measures of operating performance of REITs, they do not represent cash flows from operations or net income attributable to common stockholders as defined by GAAP and should not be considered an alternative to those measures in evaluating our liquidity or operating performance. FFO and AFFO also do not consider the costs associated with capital expenditures related to our real estate assets nor do they purport to be indicative of cash available to fund our future cash requirements. Further, our computation of FFO and AFFO may not be comparable to FFO and AFFO reported by other REITs that do not define FFO in accordance with the current NAREIT definition or that interpret the current NAREIT definition or define AFFO differently than we do.

The following table reconciles our calculations of FFO and AFFO for the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018, to net income attributable to common stockholders, the most directly comparable GAAP financial measure, for the same periods (in thousands, except share and per share amounts):

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Net income attributable to common stockholders $ 193,580
$ 17,960
$ 253,490
$ 34,222
Depreciation and amortization of real estate assets 46,828
17,220
94,833
36,357
Depreciation and amortization of real estate asset related to noncontrolling interests (40 ) —
(80 ) —
Depreciation and amortization of real estate assets related to unconsolidated joint venture 6,163
—
10,715
—
Net gain on sales of real estate (142,903 ) (4,032 ) (142,431 ) (4,032 )
Impairment of real estate 881
—
1,413
—

FFO attributable to common stockholders 104,509
31,148
217,940
66,547

Merger and acquisition costs⁽¹⁾
112
5,888
442
6,451
Stock-based compensation expense 2,704
1,731
3,839
4,319
Straight-line rental income adjustments (12,189 ) (4,971 ) (23,752 ) (9,578 )
Amortization of above and below market lease intangibles, net (684 ) —
(1,368 ) —
Non-cash interest income adjustments (604 ) 25
(1,174 ) 51
Non-cash interest expense 2,516
1,653
4,997
3,244
Change in fair value of contingent consideration —
—
—
(822 )
Provision for doubtful straight-line rental income, loan losses and other reserves 311
534
2,492
1,924
Other non-cash adjustments related to unconsolidated joint venture 1,350
—
1,014
—
Other non-cash adjustments 15
126
30
185

AFFO attributable to common stockholders $ 98,040
$ 36,134
$ 204,460
$ 72,321

FFOattributable to common stockholders per diluted common share
$ 0.58
$ 0.47
$ 1.22
$ 1.01

AFFO attributable to common stockholders per diluted common share $ 0.55
$ 0.55
$ 1.14
$ 1.10

Weighted average number of common shares outstanding, diluted:
FFO attributable to common stockholders 178,684,024
65,670,853
178,600,789
65,694,019

AFFO attributable to common stockholders 179,226,155
65,985,940
179,215,960
66,009,102


⁽¹⁾	~~Merger and acquisition costs primarily relate to the CCP Merger.~~



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net income attributable to common stockholders	$	83,677		$	193,580		$	5,973		$	253,490
Depreciation and amortization of real estate assets	49,476			46,828			94,425			94,833
Depreciation and amortization of real estate assets related to noncontrolling interests	(39		)	(40		)	(79		)	(80		)
Depreciation and amortization of real estate assets related to unconsolidated joint venture	5,347			6,163			10,663			10,715
Net gain on sales of real estate	(2,755		)	(142,903		)	(1,235		)	(142,431		)
Net loss on sales of real estate related to unconsolidated joint venture	1,690			—			1,690			—
Impairment of real estate	2,002			881			105,136			1,413

FFO attributable to common stockholders	139,398			104,509			216,573			217,940

Merger and acquisition costs	56			112			62			442
Stock-based compensation expense	2,795			2,704			5,570			3,839
Straight-line rental income adjustments	(5,242		)	(12,189		)	(10,710		)	(23,752		)
Amortization of above and below market lease intangibles, net	(1,601		)	(684		)	2,703			(1,368		)
Non-cash interest income adjustments	(563		)	(604		)	(1,125		)	(1,174		)
Non-cash interest expense	2,762			2,516			5,323			4,997
Non-cash portion of loss on extinguishment of debt	3,224			—			3,224			—
Provision for doubtful straight-line rental income, loan losses and other reserves	193			311			1,400			2,492
Non-cash lease termination income	(9,725		)	—			(9,725		)	—
Other non-cash adjustments related to unconsolidated joint venture	1,031			782			2,146			1,014
Other non-cash adjustments	46			15			98			30

AFFO attributable to common stockholders	$	132,374		$	97,472		$	215,539		$	204,460

FFOattributable to common stockholders per diluted common share	$	0.76		$	0.58		$	1.20		$	1.22

AFFO attributable to common stockholders per diluted common share	$	0.72		$	0.54		$	1.19		$	1.14

Weighted average number of common shares outstanding, diluted:
FFO attributable to common stockholders	182,254,100			178,684,024			180,637,059			178,600,789

AFFO attributable to common stockholders	183,007,434			179,226,155			181,457,685			179,215,960

The following table sets forth additional information related to certain other items included in net income attributable to common stockholders above, and the portions of each that are included in FFO and AFFO attributable to common stockholders, which may be helpful in assessing our operating results. Please refer to “—Results of Operations” above for additional information regarding these items (in millions):

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017
Net Income FFO AFFO Net Income FFO AFFO
Income on repayment of loan ⁽¹⁾
$ 0.9
$ —
$ 0.9
$ —
$ 0.9
$ —
$ 0.9
$ —
$ 0.9
$ —
$ 0.9
$ —
Previously anticipated Senior Notes refinancing expenses ⁽²⁾
0.6
—
0.6
—
0.6
—
0.6
—
0.6
—
0.6
—
CCP transition expenses ⁽²⁾
0.3
—
0.3
—
0.3
—
0.9
—
0.9
—
0.9
—
Legal fees related to the recovery of previously reserved cash rental income ⁽²⁾
0.3
—
0.3
—
0.3
—
0.6
—
0.6
—
0.6
—
Merger and acquisition costs 0.1
5.9
0.1
5.9
—
—
0.4
6.5
0.4
6.5
—
—
(Recovery of) provision for doubtful accounts (0.7 ) 0.5
(0.7 ) 0.5
(1.0 ) —
0.5
2.3
0.5
2.3
(2.0 ) 0.4
Other income —
0.9
—
0.9
—
1.1
2.8
3.1
2.8
3.1
2.8
2.4
Deferred income tax expense ⁽³⁾
0.6
—
0.6
—
—
—
1.1
—
1.1
—
—
—
Preferred stock redemption charge ⁽⁴⁾
5.5
—
5.5
—
5.5
—
5.5
—
5.5
—
5.5
—



	Three Months Ended June 30,																		Six Months Ended June 30,
	2019			2018			2019			2018			2019			2018			2019			2018		2019			2018		2019			2018
	Net Income						FFO						AFFO						Net Income					FFO					AFFO
Reduction of revenues related to above/below market lease intangible write-offs ⁽¹⁾	$	—		$	—		$	—		$	—		$	—		$	—		$	5.9		$	—	$	5.9		$	—	$	—		$	—
Lease termination income ⁽²⁾	66.9			—			66.9			—			57.2			—			66.9			—		66.9			—		57.2			—
Income on repayment of loan ⁽²⁾	—			0.9			—			0.9			—			0.9			—			0.9		—			0.9		—			0.9
Incremental interest expense related to the redemption of the 2021 Notes	1.0			—			1.0			—			1.0			—			1.0			—		1.0			—		1.0			—
Previously anticipated Senior Notes refinancing expenses ⁽³⁾	—			0.6			—			0.6			—			0.6			—			0.6		—			0.6		—			0.6
CCP transition expenses ⁽³⁾	—			0.3			—			0.3			—			0.3			0.1			0.9		0.1			0.9		0.1			0.9
Legal fees related to the recovery of previously reserved cash rental income ⁽³⁾	—			0.3			—			0.3			—			0.3			—			0.6		—			0.6		—			0.6
Merger and acquisition costs ⁽³⁾	0.1			0.1			0.1			0.1			—			—			0.1			0.4		0.1			0.4		—			—
Provision for (recovery of) doubtful accounts	0.2			(0.7		)	0.2			(0.7		)	—			(1.0		)	1.4			0.5		1.4			0.5		—			(2.0		)
Loss on extinguishment of debt	(10.1		)	—			(10.1		)	—			(6.9		)	—			(10.1		)	—		(10.1		)	—		(6.9		)	—
Other income	—			—			—			—			—			—			0.2			2.8		0.2			2.8		0.2			2.8
Deferred income tax expense ⁽⁴⁾	0.6			0.6			0.6			0.6			—			—			1.1			1.1		1.1			1.1		—			—
Preferred stock redemption charge ⁽⁵⁾	—			5.5			—			5.5			—			5.5			—			5.5		—			5.5		—			5.5


⁽¹⁾	Reflected in rental and related revenues on the accompanying condensed consolidated statements of income.


⁽²⁾	Reflected in interest and other income on the accompanying condensed consolidated statements of income.


⁽²⁾⁽³⁾	Reflected in general and administrative expenses on the accompanying condensed consolidated statements of income.


⁽³⁾⁽⁴⁾	Reflected in loss from unconsolidated joint venture on the accompanying condensed consolidated statements of income.


⁽⁴⁾⁽⁵⁾	Reflected in preferred stock dividends on the accompanying condensed consolidated statements of income.

Liquidity and Capital Resources

As of June 30, ~~2018,~~2019, we had approximately ~~$362.6~~$772.4 million in liquidity, consisting of unrestricted cash and cash equivalents of ~~$38.6~~$47.4 million (excluding joint venture cash and cash equivalents), and available borrowings under our Revolving Credit Facility of ~~$324.0~~$725.0 million. The Credit Facility also contains an accordion feature that can increase the total available borrowings to $2.5 billion (from U.S. $2.1 billion plus CAD $125.0 million), subject to terms and conditions.

In addition, ~~restricted cash as of~~subsequent to June 30, ~~2018 includes $174.4 million held~~2019, we obtained commitments for an amended and restated credit facility that we expect will close in August 2019. The amended and restated credit facility is expected to extend the maturities in the current Credit Facility (from August 2021 for the Revolving Credit Facility to August 2023, and from various maturities through August 2022 for the Term Loans to various maturities through August 2024), to decrease interest rates (by 15 basis points on the Revolving Credit Facility and by ~~exchange accommodation titleholders, which may~~20 basis points on the Term Loans), and to contain an accordion feature that can increase the total available borrowings to $2.75 billion (from U.S. $2.1 billion plus CAD $125.0 million), subject to terms and conditions. There can be ~~used to fund future real estate acquisitions.~~no assurances that the amended and restated credit facility will be entered into on the foregoing terms or timing or at all.

We have filed a shelf registration statement with the SEC that expires in January 2020, which allows us to offer and sell shares of common stock, preferred stock, warrants, rights, units, and certain of our subsidiaries to offer and sell debt securities, through underwriters, dealers or agents or directly to purchasers, on a continuous or delayed basis, in amounts, at prices and on terms we determine at the time of the offering, subject to market conditions.

On February 25, 2019, we entered into an equity distribution agreement (the “Distribution Agreement”) with a consortium of banks acting as sales agents (the “Sales Agents”) to sell shares of our common stock having aggregate gross proceeds of up to $500.0 million from time to time through the Sales Agents (the “ATM Program”). During the three and six months ended June 30, 2019, we sold 11.1 million shares under the ATM Program, generating gross proceeds of $217.3 million, before $3.3 million of commissions. As of June 30, 2019, we had $282.7 million available under the ATM Program. Subject to market conditions, we expect to use proceeds from our ATM Program to reduce our outstanding indebtedness and to finance future investments in properties.

We believe that our available cash, operating cash flows and borrowings available to us under our Revolving Credit Facility provide sufficient funds for our operations, scheduled debt service payments and dividend requirements for the next twelve months. In addition, we do not believe that the restrictions under our Senior Notes Indentures (as defined below) or Credit Facility significantly limit our ability to use our available liquidity for these purposes.

We intend to invest in additional healthcare properties as suitable opportunities arise and adequate sources of financing are available. We expect that future investments in properties, including any improvements or renovations of current or newly-acquired properties, will depend on and will be financed, in whole or in part, by our existing cash, borrowings available to us under our Revolving Credit Facility, future borrowings or the proceeds from issuances of common stock (including through our ATM Program), preferred stock, debt or other securities. In addition, we may seek financing from U.S. government agencies, including through Fannie Mae and HUD, in appropriate circumstances in connection with acquisitions.

We also use derivative instruments in the normal course of business to mitigate interest rate and foreign currency risk.

Cash Flows from Operating Activities

Net cash provided by operating activities was ~~$211.6~~$191.9 million for the six months ended June 30, ~~2018~~2019. Operating cash inflows were derived primarily from the rental payments received under our lease agreements, resident fees and services net of the corresponding operating expenses and interest payments from borrowers under our loan investments. In addition, net cash provided by operating activities for the six months ended June 30, 2019 includes a $57.2 million lease termination payment in connection with the transition of the Holiday Communities to our Senior Housing - Managed portfolio. Operating cash outflows consisted primarily of interest payments on borrowings and payment of general and administrative expenses, including corporate overhead. We expect our annualized cash flows provided by operating activities to ~~increase~~fluctuate as a result of ~~the CCP Merger~~completed investment and ~~other completed~~disposition activity and anticipated future ~~real estate investments.~~changes in our portfolio.

Cash Flows from Investing Activities

During the six months ended June 30, ~~2018~~2019, net cash ~~used in~~provided by investing activities was ~~$296.9~~$317.9 million and consisted of ~~$354.5~~$322.7 million ~~used for our investment~~ in sales proceeds related to the ~~Enlivant Joint Venture, $214.0~~disposition of 38 real estate facilities, $10.1 million ~~used~~ in ~~the acquisition~~repayments of ~~11 Senior Housing - Managed communities, five senior housing communities~~loans receivable and ~~two skilled nursing/transitional care facilities, $28.2~~$2.5 million in repayments of preferred equity investments, partially offset by $8.8 million used to provide additional funding for existing loans receivable ~~$16.8~~and $8.6 million used for tenant improvements and $0.9 million used to fund preferred equity investments, partially offset by $278.2 million in sales proceeds related to the disposition of 37 real estate facilities, $38.9 million in repayments of loans receivable and $0.4 million in repayments of preferred equity investments.improvements.

We expect to continue using available liquidity ~~in connection with~~and proceeds from sales of our common stock under the ATM Program to fund anticipated future real estate investments, loan originations, ~~and~~ preferred equity ~~investments.~~investments and capital expenditures.

Cash Flows from Financing Activities

During the six months ended June 30, ~~2018,~~2019, net cash used in financing activities was ~~$276.2~~$512.2 million and included ~~$164.7~~the redemption of $500.0 million aggregate principal amount of outstanding 2021 Notes, $161.7 million of dividends paid to stockholders, ~~$143.8~~$6.9 million ~~for the preferred stock redemption payment, $2.1~~of payments related to extinguishment of debt, $4.4 million of payments of deferred financing costs and $1.7 million of principal repayments ofon secured debt, partially offset by $300.0 million of gross proceeds from the issuance of the 2024 Notes and ~~$0.5~~$211.6 million inof net proceeds from shares sold through our ATM Program, net of payroll tax payments related to the issuance of common stock pursuant to equity compensation ~~arrangements.~~arrangements as well as expenses with respect to establishing the ATM Program. In addition, during the six months ended June 30, ~~2018~~2019, we ~~borrowed~~repaid a net amount of $~~35.0~~349.0 million on our Revolving Credit Facility.

Please see the accompanying condensed consolidated statements of cash flows for details of our operating, investing and financing cash activities.

Loan Agreements

2021 Notes. On January 23, 2014, the Operating Partnership and Sabra Capital Corporation, wholly owned subsidiaries of Sabra (the “Issuers”), issued $350.0 million aggregate principal amount of 5.5% senior unsecured notes due 2021 (the “Original 2021 Notes”), providing net proceeds of approximately $340.8 million after deducting underwriting discounts and other offering expenses. On October 10, 2014, the Issuers issued an additional $150.0 million aggregate principal amount of 5.5% senior unsecured notes due 2021 (together with the Original 2021 Notes, the “2021 Notes”), providing net proceeds of approximately $145.6 million (not including pre-issuance accrued interest), after deducting underwriting discounts and other offering ~~expenses~~expenses. On June 29, 2019, we redeemed the 2021 Notes at a premium of 101.375%, plus accrued and ~~a yield-to-maturity~~unpaid interest. The redemption resulted in $10.1 million of ~~5.593%.~~redemption related costs and write-offs.

2023 Notes. On May 23, 2013, the Issuers issued $200.0 million aggregate principal amount of 5.375% senior notes due 2023 (the “2023 Notes”), providing net proceeds of approximately $194.6 million after deducting underwriting discounts and other offering expenses.

2024 Notes. On May 29, 2019, the Issuers issued $300.0 million aggregate principal amount of 4.80% senior notes due 2024 (the “2024 Notes”), providing net proceeds of approximately $295.3 million after deducting underwriting discounts and other offering expenses.

2026 and 2027 Notes. In connection with the CCP Merger, on August 17, 2017, Sabra assumed $500 million aggregate principal amount of 5.125% senior notes due 2026 (the “2026 Notes”) and $100 million aggregate principal amount of 5.38% senior notes due 2027 (the “2027 Notes” and, together with the ~~2021~~2023 Notes, the ~~2023~~2024 Notes and the 2026 Notes, the “Senior Notes”).

See Note 7, “Debt,” in the Notes to Condensed Consolidated Financial Statements for additional information concerning the Senior Notes, including information regarding the indentures and agreements governing the Senior Notes (the “Senior Notes Indentures”). As of June 30, ~~2018~~2019, we were in compliance with all applicable covenants under the Senior Notes Indentures.

Credit Facility. Effective on August 17, 2017, the Operating Partnership and Sabra Canadian Holdings, LLC (together, the “Borrowers”), Sabra and the other parties thereto entered into a fourth amended and restated unsecured credit facility (the “Credit Facility”).

million of the Revolving Credit Facility may be used for borrowings in certain foreign currencies. The Credit Facility also contains an accordion feature that can increase the total available borrowings to $2.5 billion, subject to terms and conditions.

The obligations of the Borrowers under the Credit Facility are guaranteed by us and certain of our subsidiaries.

See Note 7, “Debt,” in the Notes to Condensed Consolidated Financial Statements for additional information concerning the Credit Facility, including information regarding covenants contained in the Credit Facility. As of June 30, ~~2018~~2019, we were in compliance with all applicable covenants under the Credit Facility.

Secured Indebtedness

Of our ~~487~~432 properties held for investment, 3016 are subject to secured indebtedness to third parties that, as of June 30, ~~2018~~2019, totaled approximately $~~256.3~~116.4 million. As of June 30, ~~2018~~2019 and December 31, ~~2017~~2018, our secured debt consisted of the following (dollars in thousands):


Interest Rate Type	Principal Balance as of June 30, 2018 ⁽¹⁾		Principal Balance as of December 31, 2017⁽¹⁾		Weighted Average Effective Interest Rate at June 30, 2018 ⁽²⁾		Maturity Date	Principal Balance as of June 30, 2019 ⁽¹⁾		Principal Balance as of December 31, 2018⁽¹⁾		Weighted Average Effective Interest Rate at June 30, 2019 ⁽²⁾		Maturity Date
Fixed Rate	$	157,781	$	160,702	3.87	%	December 2021 - August 2051	$	116,421	$	117,464	3.67	%	December 2021 - August 2051
Variable Rate	98,500		98,500		3.89	%	July 2019
	$	256,281	$	259,202	3.88	%


⁽¹⁾	Principal balance does not include deferred financing costs, net of ~~$2.7~~$1.7 million and ~~$2.8~~$1.8 million as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.


⁽²⁾	Weighted average effective interest rate includes private mortgage insurance.

Capital Expenditures

We had ~~$16.8~~$8.6 million and ~~$1.3~~$16.8 million of capital expenditures for the six months ended June 30, 2019 and 2018, ~~and 2017,~~ respectively. ~~The capital expenditures for the six months ended June 30, 2018 and 2017 include $40,000 and $12,000, respectively, of capital expenditures for corporate office needs.~~ There are no present plans for the improvement or development of any unimproved or undeveloped property; however, from time to time we may agree to fund improvements our tenants make at our facilities. Accordingly, we anticipate that our aggregate capital expenditure requirements for the next 12 months will not exceed ~~$59.0~~$64.0 million, and that such expenditures will principally be for improvements to our facilities and result in incremental rental income.

Dividends

We paid dividends of ~~$164.7~~$161.7 million on our common ~~and preferred~~ stock during the six months ended June 30, ~~2018. As described above, on June 1, 2018, we redeemed all outstanding shares of our Series A Preferred Stock.~~2019. On August ~~8, 2018,~~7, 2019, our board of directors declared a quarterly cash dividend of $0.45 per share of common stock. The dividend will be paid on August ~~31, 2018~~30, 2019 to common stockholders of record as of August ~~18, 2018.~~20, 2019.

Concentration of Credit Risk

Concentrations of credit risk arise when a number of operators, tenants or obligors related to our investments are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to us, to be similarly affected by changes in economic conditions. We regularly monitor our portfolio to assess potential concentrations of risks.

Management believes our current portfolio is reasonably diversified across healthcare related real estate and geographical location and does not contain any other significant concentration of credit risks. Our portfolio of ~~487~~432 real estate properties held for investment as of June 30, ~~2018~~2019 is diversified by location across the United States and Canada.

For the three and six months ended June 30, ~~2018,~~2019, no tenant ~~relationships~~relationship represented 10% or more of our total revenues.

Skilled Nursing Facility Reimbursement Rates

For the six months ended June 30, ~~2018, 63.9%~~2019 (excluding the one-time lease termination income of $66.9 million), 56.8% of our revenues was derived directly or indirectly from skilled nursing/transitional care facilities. Medicare reimburses skilled nursing facilities for Medicare Part A services under the Prospective

Payment System (“PPS”), as implemented pursuant to the Balanced Budget Act of 1997 and modified pursuant to subsequent laws, most recently the Patient Protection and Affordable Care Act of 2010. PPS regulations predetermine a payment amount per patient, per day, based on a market basket index calculated for all covered costs. The amount to be paid is determined by classifying each patient into one of 66 Resource Utilization Group (“RUG”) categories that represent the level of services required to treat different conditions and levels of acuity.

The current system of 66 RUG categories, or Resource Utilization Group, ~~Version~~version IV (“~~RUG-IV”~~RUG IV”), became effective as of October 1, 2010. ~~RUG-IV~~RUG IV resulted from research performed by the Centers for Medicare & Medicaid Services (“CMS”) and was part of CMS’s continuing effort to increase the correlation of the cost of services to the condition of individual patients.

On July 31, 2018, CMS issued a final rule, CMS-1696-F, which includes changes to the case-mix classification system used under the PPS and fiscal year 2019 Medicare payment updates.

CMS-1696-F includes a new case-mix classification system called the skilled nursing facility Patient-Driven Payment Model (“PDPM”) that will become effective on October 1, 2019. PDPM reflects significant changes to the Resident Classification System, Version I (“RCS-I”) that was being considered to replace ~~RUG-IV~~RUG IV as outlined in an Advanced Notice of Proposed Rulemaking released by CMS in May 2017.

PDPM focuses on clinically relevant factors, rather than volume-based service, for determining Medicare payment. PDPM adjusts Medicare payments based on each aspect of a resident’s care, most notably for non-therapy ancillaries, which are items and services not related to the provision of therapy such as drugs and medical supplies, thereby more accurately addressing costs associated with medically complex patients. It further adjusts the skilled nursing facility per diem payments to reflect varying costs throughout the stay and incorporates safeguards against potential financial incentives to ensure that beneficiaries receive care consistent with their unique needs and goals.

Based on changes contained within CMS-1696-F, CMS estimates that the fiscal year 2019 aggregate impact will be an increase of $820 million in Medicare payments to skilled nursing facilities, resulting from the fiscal year 2019 market basket update required to be 2.4% by the Bipartisan Budget Act of 2018. Absent the application of this statutory requirement, the fiscal year 2019 market basket update factor would have been 2.0% (comprised of a market basket index of 2.8% less the productivity adjustment of 0.8%). This 2.0% update would have resulted in an estimated aggregate increase of $670 million in Medicare payments to skilled nursing facilities. The new payment rates became effective on October 1, 2018.

On July ~~31, 2017,~~30, 2019, CMS released final fiscal year ~~2018~~2020 Medicare rates for skilled nursing facilities providing an estimated net increase of 1.0% over fiscal year 2017 payments. The new payment rates became effective on October 1, 2017. In its final rule, CMS also revised and rebased the market basket index by updating the base year from fiscal year 2010 to fiscal year 2014.

~~On July 29, 2016, CMS released final fiscal year 2017 Medicare rates for skilled nursing facilities providing a net increase of~~ 2.4% over fiscal year ~~2016~~2019 payments (comprised of a market basket increase of ~~2.7%~~2.8% less the productivity adjustment of ~~0.3%~~0.4%). The new payment rates ~~became~~become effective on October 1, ~~2016.~~2019.

Obligations and Commitments

The following table summarizes our contractual obligations and commitments in future years, including our secured indebtedness to third parties on certain of our properties, our Revolving Credit Facility, our Term Loans, our Senior Notes and our operating leases. The following table is presented as of June 30, ~~2018~~2019 (in thousands):


			July 1 through December 31, 2018								Year Ending December 31,																		July 1 through December 31, 2019								Year Ending December 31,
	Total					2019				2020				2021				2022				After 2022			Total				July 1 through December 31, 2019			2020				2021				2022				2023				After 2023
Secured indebtedness ⁽¹⁾	$	334,672	July 1 through December 31, 2018	$	6,820			$	110,395			$	9,723			$	24,759			$	8,581			$	174,394		$	165,694		$	3,650			$	7,301			$	22,388			$	6,154			$	6,154			$	120,047
Revolving Credit Facility ⁽²⁾	755,699		12,819				25,428				25,498				691,954				—				—			302,144			6,411				12,753				282,980				—				—				—
Term Loans ⁽³⁾	1,336,171		17,393				34,502				233,208				33,799				1,017,269				—			1,303,324			17,804				233,427				32,706				1,019,387				—				—
Senior Notes ⁽⁴⁾	1,702,482		34,627				69,255				69,255				555,505				41,755				932,085			1,457,548			28,198				56,155				56,155				56,155				250,780				1,010,105
Operating leases	3,645		326				440				426				445				467				1,541			3,076			197				426				445				467				507				1,034
Total	$	4,132,669	$	71,985			$	240,020			$	338,110			$	1,306,462			$	1,068,072			$	1,108,020		$	3,231,786		$	56,260			$	310,062			$	394,674			$	1,082,163			$	257,441			$	1,131,186


⁽¹⁾	Secured indebtedness includes principal payments and interest payments through the applicable maturity dates. Total interest on secured indebtedness, based on contractual rates, is ~~$78.4~~$49.3 million of which ~~$4.1 million~~ is attributable to ~~variable~~fixed rate debt.


⁽²⁾	Revolving Credit Facility includes payments related to the facility fee due to the lenders based on the amount of commitments under the Revolving Credit Facility and also includes interest payments through the maturity date (assuming no exercise of our two six-month extension options). Total interest on the Revolving Credit Facility is ~~$79.7~~$27.1 million.


⁽³⁾	Term Loans includes interest payments through the applicable maturity dates totaling ~~$141.0~~$107.8 million.


⁽⁴⁾	Senior Notes includes interest payments through the applicable maturity dates totaling ~~$402.5~~$357.5 million.

In addition to the above, as of June 30, ~~2018,~~2019, we have committed to provide up to ~~$12.6~~$3.3 million of future funding related to ~~seven investments, including six~~three loans receivable investments with maturity dates ranging from ~~September 2018~~December 2021 to ~~January 2027.~~December 2022.

Off-Balance Sheet Arrangements

We have a 49% interest in an unconsolidated joint venture. See Note 2, “Summary of Significant Accounting Policies” in the Notes to Condensed Consolidated Financial Statements for additional information. We have no other off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, primarily related to adverse changes in interest rates and the exchange rate for Canadian dollars. We use derivative instruments in the normal course of business to mitigate interest rate and foreign currency risk. We do not use derivative financial instruments for speculative or trading purposes. See Note 8, “Derivative and Hedging Instruments,” in the Notes to Condensed Consolidated Financial Statements for further discussion onof our derivative instruments.

Interest rate risk. As of June 30, ~~2018,~~2019, our indebtedness included ~~$1.3~~$1.1 billion aggregate principal amount of Senior Notes outstanding, ~~$256.3~~$116.4 million of secured indebtedness to third parties on certain of the properties that our subsidiaries own, $1.2 billion in Term Loans and ~~$676.0~~$275.0 million outstanding under the Revolving Credit Facility. As of June 30, ~~2018,~~2019, we had ~~$2.0~~$1.5 billion of outstanding variable rate indebtedness and ~~$324.0~~$725.0 million available for borrowing under our Revolving Credit Facility. Additionally, as of June 30, ~~2018,~~2019, our share of unconsolidated joint venture debt was ~~$384.2~~$373.7 million, all of which ~~$382.1 million~~ was variable rate indebtedness.

We expect to manage our exposure to interest rate risk by maintaining a mix of fixed and variable rates for our indebtedness. We also may manage, or hedge, interest rate risks related to our borrowings through interest rate swap agreements. As of June 30, ~~2018,~~2019, we had 10 interest rate swaps that fix the LIBOR portion of the interest rate for $845.0 million of LIBOR-based borrowings under the U.S. dollar Term Loans at a weighted average rate of 1.19% and two interest rate swaps that fix the ~~CDOR~~Canadian Dollar Offered Rate (“CDOR”) portion of the interest rate for CAD $90.0 million and CAD $35.0 million of CDOR-based borrowings at 1.59% and 0.93%, respectively. ~~Additionally, as~~As of June 30, ~~2018,~~2019, our share of unconsolidated joint venture debt included $368.4 million of LIBOR-based borrowings subject to interest rate cap agreements that cap the LIBOR portion of the interest rate at a weighted average rate of 2.89%.

From time to time, we may borrow under the Revolving Credit Facility to finance future investments in properties, including any improvements or renovations of current or newly acquired properties, or for other purposes. Because borrowings under the Revolving Credit Facility bear interest on the outstanding principal amount at a rate equal to an applicable interest margin plus, at our option, either (a) LIBOR or (b) a base rate determined as the greater of (i) the federal funds rate plus 0.5%, (ii) the prime rate, and (iii) one-month LIBOR plus 1.0%, the interest rate we will be required to pay on any such borrowings will depend on then applicable rates and may vary. An increase in interest rates could make the financing of any investment by us more costly. Rising interest rates could also limit our ability to refinance our debt when it matures or cause us to pay higher interest rates upon refinancing and increase interest expense on refinanced indebtedness.

Assuming a 100 basis point increase or decrease in the interest rate related to our variable rate debt, including our share of unconsolidated joint venture debt, and after giving effect to the impact of interest rate swap derivative instruments, income would decrease by ~~$13.4~~$7.1 million or increase by ~~$14.1~~$9.0 million, respectively, for the twelve months following June 30, ~~2018.~~2019.

Foreign currency risk. We are exposed to changes in foreign exchange rates as a result of our investments in Canadian real estate. Our foreign currency exposure is partially mitigated through the use of Canadian dollar denominated debt totaling CAD ~~$147.3~~$146.6 million and cross currency swap instruments. Based on our operating results for the three months ended June 30, ~~2018,~~2019, if the value of the Canadian dollar relative to the U.S. dollar were to increase or decrease by 10% compared to the average exchange rate during the three months ended June 30, ~~2018,~~2019, our cash flows would have decreased or increased, as applicable, by $0.1 million.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this report, management, including our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of, the evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of June 30, ~~2018~~2019 to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, ~~2018~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None of the Company or any of its subsidiaries is a party to, and none of their respective property is the subject of, any material legal proceeding, although we are from time to time party to legal proceedings that arise in the ordinary course of our business.

ITEM 1A. RISK FACTORS

There have been no material changes in our assessment of our risk factors from those set forth in Part I, Item 1A of our ~~2017~~2018 Annual Report on Form ~~10-K.~~10-K, as updated by the risk factor set forth in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.

ITEM 6. EXHIBITS



Ex.		Description

2.1		Agreement and Plan of Merger, dated as of May 7, 2017, by and among Sabra Health Care REIT, Inc., PR Sub, LLC, Sabra Health Care Limited Partnership, Care Capital Properties, Inc. and Care Capital Properties, LP (incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K filed by Sabra Health Care REIT, Inc. on May 8, 2017).†

3.1		Articles of Amendment and Restatement of Sabra Health Care REIT, Inc., dated October 20, 2010, filed with the State Department of Assessments and Taxation of the State of Maryland on October 21, 2010 (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed by Sabra Health Care REIT, Inc. on October 26, 2010).

3.1.1		Articles of Amendment to the Articles of Amendment and Restatement of Sabra Health Care REIT, Inc., dated as of July 31, 2017 (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed by Sabra Health Care REIT, Inc. on July 31, 2017).

3.2		Amended and Restated Bylaws of Sabra Health Care REIT, Inc. (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed by Sabra Health Care REIT, Inc. on ~~May 7, 2017)~~March 14, 2019).

12.1*4.1		~~Statement Re: Computation~~Eighth Supplemental Indenture, dated May 29, 2019, among Sabra Health Care Limited Partnership, Sabra Capital Corporation, Sabra Health Care REIT, Inc., the other guarantors named therein, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.2 of ~~Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends.~~the Current Report on Form 8-K filed by Sabra Health Care REIT, Inc. on May 29, 2019).

10.1		Second Amendment, dated as of May 10, 2019, to the Fourth Amended and Restated Credit Agreement, dated as of August 17, 2017, among Sabra Health Care Limited Partnership and Sabra Canadian Holdings, LLC, as Borrowers; Sabra Health Care REIT, Inc., as a guarantor; the other guarantors party thereto; the lenders party thereto; Bank of America, N.A., as Administrative Agent, and Bank of America, N.A., Citizens Bank, National Association, Crédit Agricole Corporate and Investment Bank and Wells Fargo Bank, N.A., as Swing Line Lenders and L/C Issuers (incorporated by reference to Exhibit 99.1 of the Current Report on Form 8-K filed by Sabra Health Care REIT, Inc. on May 13, 2019).

31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*		XBRL Instance ~~Document.~~Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*		XBRL Taxonomy Extension Schema Document.

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document.



Ex.		Description


104*		Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.



*	Filed herewith.
**	Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	SABRA HEALTH CARE REIT, INC.

Date: August ~~8, 2018~~7, 2019	By:	/S/ RICHARD K. MATROS
		Richard K. Matros
		Chairman, President and
		Chief Executive Officer
		(Principal Executive Officer)

Date: August ~~8, 2018~~7, 2019	By:	/S/ HAROLD W. ANDREWS, JR.
		Harold W. Andrews, Jr.
		Executive Vice President,
		Chief Financial Officer and Secretary
		(Principal Financial and Accounting Officer)

5961



		Page Numbers
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Condensed Consolidated Balance Sheets	4

	Condensed Consolidated Statements of Income	5

	Condensed Consolidated Statements of Comprehensive Income (Loss)	6

	Condensed Consolidated Statements of Equity	7

	~~Condensed Consolidated Statements of Cash Flows~~	8

	~~Notes to~~ Condensed Consolidated ~~Financial~~ Statements of Cash Flows	9

	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5657

Item 4.	Controls and Procedures	5657

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	5859

Item 1a.	Risk Factors	5859

Item 6.	Exhibits	5859

Signatures		5961



	Six Months Ended June 30, 2017
	As Reported		As Previously Reported
Net cash provided by operating activities	54,282		53,871
Net decrease in balance	(12,147	)	(12,558	)
Balance - beginning of the year	34,665		25,663
Balance - end of the year	22,648		13,235



Real estate investments	$	3,727,310
Loans receivable and other investments	58,244
Cash and cash equivalents	77,859
Restricted cash	779
Lease intangible assets, net	145,786
Accounts receivable, prepaid expenses and other assets, net	35,873
Secured debt, net	(98,500		)
Revolving credit facility	(362,000		)
Unsecured term loans	(674,000		)
Senior unsecured notes, net	(616,873		)
Accounts payable and accrued liabilities	(134,802		)
Lease intangible liabilities, net	(102,643		)
Noncontrolling interests	(4,455		)
Total consideration	$	2,052,578



July 1 through December 31, 2018	$	260,307
2019	529,844
2020	522,304
2021	520,553
2022	512,680
Thereafter	3,083,776
	$	5,429,464



											June 30, 2018
Investment	Quantity as of June 30, 2018	Property Type	Principal Balance as of June 30, 2018 ⁽¹⁾		Book Value as of June 30, 2018			Book Value as of December 31, 2017			Weighted Average Contractual Interest Rate / Rate of Return		Weighted Average Annualized Effective Interest Rate / Rate of Return		Maturity Date as of June 30, 2018
Loans Receivable:
Mortgage	1	Specialty Hospital	$	15,332	$	15,332		$	12,351		10.0	%	10.0	%	01/31/27
Construction	2	Senior Housing	3,989		4,055			2,733			8.0	%	7.8	%	04/30/21- 09/30/22
Mezzanine	1	Skilled Nursing	25,000		2,301			10,239			10.0	%	41.9	%	05/25/20
Pre-development	1	Senior Housing	2,357		2,357			2,357			9.0	%	8.4	%	04/01/20
Other	17	Multiple	34,009		32,191			38,324			8.5	%	9.7	%	12/31/17- 04/30/27

	22		80,687		56,236			66,004			9.3	%	10.9	%

Loan loss reserve			—		(356		)	(97		)

			$	80,687	$	55,880		$	65,907
Other Investments:
Preferred Equity	13	Skilled Nursing / Senior Housing	50,856		51,348			48,483			12.6	%	12.6	%	N/A

Total	35		$	131,543	$	107,228		$	114,390		10.6	%	11.7	%



	Three Months Ended			Six Months Ended
	June 30, 2018
Accretable yield, beginning of period	$	1,883		$	2,483
Accretion recognized in earnings	(1,529		)	(2,129		)
Net reclassification from nonaccretable difference	727			727
Accretable yield, end of period	$	1,081		$	1,081



		Count as of June 30, 2018	Fair Value				Maturity Dates
Type	Designation	Count as of June 30, 2018	June 30, 2018		December 31, 2017		Maturity Dates	Balance Sheet Location
Assets:
Interest rate swaps	Cash flow	12	$	35,719	$	25,221	2020 - 2023	Accounts receivable, prepaid expenses and other assets, net
Cross currency interest rate swaps	Net investment	2	2,146		674		2025	Accounts receivable, prepaid expenses and other assets, net
			$	37,865	$	25,895

Liabilities:
CAD term loan	Net investment	1	95,163		99,588		2022	Term loans, net
			$	95,163	$	99,588



	As of December 31, 2017
	Gross Amounts of Recognized Assets / Liabilities		Gross Amounts Offset in the Balance Sheet		Net Amounts of Assets / Liabilities presented in the Balance Sheet		Gross Amounts Not Offset in the Balance Sheet
	Gross Amounts of Recognized Assets / Liabilities		Gross Amounts Offset in the Balance Sheet				Financial Instruments		Cash Collateral Received		Net Amount
Offsetting Assets:
Derivatives	$	25,895	$	—	$	25,895	$	—	$	—	$	25,895
Offsetting Liabilities:
Derivatives	$	—	$	—	$	—	$	—	$	—	$	—

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